Chuah Choon Bin Pentamaster executive chairman at Pentamaster Penang HQ in Bayan Lepas factory, Penang.
GEORGE TOWN: Pentamaster Corp Bhd
will spend RM200mil in 2024 and 2025 to complete its third plant and set up two design and development centres in the United States and Europe.
Executive chairman Chuah Choon Bin told StarBiz that the group had already invested RM80mil into the third plant.
“The third plant will design and manufacture automation solutions for medical technology devices, consumer electronics and semiconductors. The plant should be ready in early 2025,” he said.
Chuah said the group planned to set up design and development centres in California and Munich this year to serve electric vehicle (EV) and medical technology customers.
According to the Korea Automotive Technology Institute, global automobile sales are estimated to increase by 10.4% to 90.1 million units in 2023 compared to the previous year. But the global automobile sales growth will likely slow to 2.4% year-on-year to 92.2 million units in 2024.
According to Chuah, the share of EVs will sharply increase.
Research house Gartner projects the shipment of about 15 million electric cars (battery electric and plug-in hybrid) in 2023, to increase by 19% to 17.9 million units this year.
Chuah believed the semiconductor market has reached a bottom and is expected to grow on a quarter-on-quarter basis starting in the first half of 2024.
“With the introduction of artificial intelligence-powered personal computers and smartphones, the demand for consumer electronic products will grow between 2024 and 2026.
“The group continues to focus on making testers used for checking power and semiconductor components of EVs.
“We will also concentrate on producing factory automation systems for medical technology products,” he added.
Chuah said the global smartphone market was expected to increase in the second quarter of 2024.
“The smartphone market used to generate 50% of our revenue but its contribution contracted over the past few years.
“We expect the smartphone sector to pick up in the second quarter of 2024,” Chuah said.
Global technology market analyst firm Canalys expects the smartphone market to contract by 5% in 2023 and that 1.13 billion smartphones would be shipped out.
The firm projects a 4% growth in 2024 in the smartphone market that would see a shipment of 1.17 billion smartphones.
After recording a remarkable double-digit revenue growth for the nine months ended on Sept 30, 2023, Pentamaster is confident of posting a record-breaking result in the full financial year (FY23).
According to SEMI, the global sales of total semiconductor manufacturing equipment by original equipment manufacturers are forecast to reach US$100bil 2023, a contraction of 6.1% from the industry record of US$107.4bil posted in 2022.
SEMI is a global industry association that provides a platform to unite the semiconductor ecosystem.
“Semiconductor manufacturing equipment growth is expected to resume in 2024, with sales forecast to reach a new high of US$124bil in 2025, supported by both the front-end and back-end segments,” it said.
Meanwhile, Phillip Capital Research expected the demand for insulated gate bipolar transistors (IGBT) and silicon carbide (SiC) batteries in EVs to drive Pentamaster’s growth.
“Both IGBT and SiC offer enormous opportunities for Pentamaster to grow the automotive segment further.
“While SiC is still at a relatively infant stage of adoption, we expect SiC to gain momentum in the years ahead,” Phillip Capital said.
Pentamaster provides comprehensive and customisable solutions for IGBT and SiC batteries, covering component assembly to final inspection and testing.
Phillip Capital also sees further upside from medical sector expansion.
Pentamaster entered into the medical business after acquiring TP Concept in 2019. It is completing a third plant with an area of 720,000 sq ft, partly for the expansion of its medical segment.
The expansion of the existing customer base in Penang and the rising demand for healthcare products will serve as the other avenues for earnings growth.
Phillip Capital is forecasting a three-year profit with a 17% compound annual growth rate till 2025 on its ability to capture more automated test equipment and medical orders for the factory automation solutions segment, capacity expansion and recovery in the automotive and semiconductor industries.
“We expect the medical business to contribute about 10% of the group’s revenue by 2025,” the research house said.
Pentamaster has consistently generated positive operating cash flows since 2019 and has invested in capital expenditure with little borrowings.
“There is no official dividend policy but Pentamaster has historically distributed around 10% of its annual after-tax profit for the past two years.
“We project a similar payout moving forward,” Phillip Capital added.
Pentamaster is among the top four global manufacturers of this proprietary SiC wafer burn-in system. Phillip Capital expects SiC adoption to gain more robust traction in the years ahead, driving Pentamaster’s growth.
