KUALA LUMPUR (Dec 4): Shares of Pentamaster Corporation Bhd (KL:PENTA) shot up as much as 22.6% to RM4.23 — a three-month high — after its 63.9%-owned subsidiary Pentamaster International Ltd voluntarily suspended trading of its shares on the Hong Kong Stock Exchange. 

Just a day before, Pentamaster International’s share price shot up 19.4% to HK$0.80 (RM0.46) per share and requested for a trading halt starting from 9am on Wednesday, pending the release of an announcement in relation to certain inside information of the company.

Market watchers speculated that Malaysia-listed Pentamaster might privatisate the HK-listed Pentamaster International, which contributes the majority of Pentamaster Corp's earnings and is trading at a much cheaper valuation.

When asked by The Edge, Pentamaster Corp executive chairman Chuah Choon Bin did not deny nor confirm the privatisation notion, and replied in email that: “We do have some news in the offing, but I need the regulators to first approve what we can say publicly about it.”

“Let us circle back with you in about a week or so, by then I expect we can have more meaningful updates.”

Most analysts think a privatisation move would be accretive to Pentamaster Corp’s earnings.

This is because Pentamaster International, trading at a much lower valuation, houses the group’s core business activities, such as automated test equipment, factory automation solution, warehouse automation solution, medical automation solution and contract manufacturing services.

For the financial year ended Dec 31, 2023 (FY2023), Pentamaster Corp reported a total net profit of RM89.1 million on revenue of RM691.9 million, while Pentamaster International posted net profit of RM142.2 million on RM691.9 million revenue.

In terms of valuations, holding company Pentamaster Corp was trading at a trailing 12-month price-earnings ratio (PER) of some 40 times, compared with Pentamaster International’s trailing PER of 8.88 times at the time of writing. 

One analyst noted that even with privatisation of the Hong Kong unit at a 25% premium of HK$1 per share, the potential earnings accretive is about 10% to 15% of Pentamaster Corp’s FY2025-FY2026 numbers.

Shares of Pentamaster Corp closed up 55 sen or 15.94% at RM4 at Wednesday's close, valuing it at market capitalisation of RM2.85 billion. Year to date, the stock has fallen 12.28%.