PETALING JAYA: Pentamaster Corp Bhd continues to see healthy order replenishment and backlog orders at record levels of above RM500mil as of the end of September 2022.
Out of this, 60% of the orders are from the automated test equipment (ATE) segment and the remaining 40% from the factory automation solutions (FAS) segment, CGS-CIMB Research said in a post third-quarter 2022 (3Q22) results briefing with Pentamaster’s management.
In 3Q22, the company’s net profit increased 5.6% from a year ago to RM20.07mil, bringing its nine-month profitability up 12.6% to RM59.7mil.
According to CGS-CIMB Research, Pentamaster indicated that the medical devices segment was gaining good traction, underpinned by new capacity expansion at its customers in Penang and globally, which in turn pushed up its order book mix for FAS from 30% in June 2022 to 40% in Sept 2022.
“Management targets the medical devices segment to contribute 12% to 14% revenue in forecast FY22 and 20% in FY23, versus 6% in 2021.
“The FAS segment is now enjoying a higher 32% gross profit margin versus ATE’s 30%, partially thanks to a better sales mix oriented towards higher margin applications, like medical devices,” the research firm said.
Another key takeaway from the management briefing was that the group expects the first phase of its Plant 3, covering a built-up area of about 300,000 sq ft, to be commissioned in the second half of 2032. Meanwhile, the equal-sized second phase is slated to be ready in the first half of 2024.
CGS-CIMB Research said Plant 3 will be dedicated to the FAS division, and overall, it will be instrumental to the group in achieving the target of hitting RM1bil revenue by 2025.
The research firm said it was keeping its “hold” rating on the stock, with an unchanged RM3.75 target price based on a 2024 price-to-earnings ratio of 22 times, which was one standard deviation below the Malaysian ATE sector’s five-year mean PE of 31 times.
“We see easing travel restrictions, stronger earnings contribution from the automotive and medical segments, US Food and Drug Administration (FDA) approval for new medical consumables and new customer wins as potential upside devlopments” said CGS-CIMB Research.
The downside risks to the “hold” call are delays in FDA approval for new medical consumables, an extended slowdown in mobile device demand and the deferment of order fulfillment due to slower inventory digestion in the semiconductor industry.
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