PETALING JAYA: Pentamaster Corp Bhd
’s key earnings growth in 2024 will be driven by the medical segment even as it anticipates recovery in the semiconductors and electro-optics segments in the second half of the year (2H24).
However, its automotive segment is expected to experience prolonged weakness.
“Management has adopted a more conservative tone for financial year 2024 (FY24) due to the slower-than-expected automotive-sector performance. It is now anticipating flattish year-on-year revenue, with earnings to be cushioned by slightly better margins,” RHB Research said in a report.
Nevertheless, the research house said it remains upbeat on Pentamaster’s outlook as it stands to benefit from the proliferation of power semiconductor devices driven by advancements in artificial intelligence (AI), automotive electrification, and medical-manufacturing automation.
According to RHB Research, the group’s order book of RM400mil indicates continued weakness in the automotive segment, with guidance suggesting it will contribute below 30% to overall FY24 revenue.
“We note the potential upside should orders come in faster than expected, which could slightly boost the group’s earnings,” RHB said.
While the medical-device segment will continue to be a key contributor, Pentamaster anticipates a softer 2H24, expecting it to account for 35% to 40% of FY24 revenue due to major projects being spillovers from 2023 and deliveries frontloaded in 1H24.
Despite the outlook, the research house noted that there are no delays or cancellations from major customer as the company’s capital expenditure plans remain on track.
Meanwhile, the semiconductor division is projected to post improved numbers in 2H, supported by the gradual recovery of the sector, with guidance suggesting a 10% to 12% share of total revenue. Pentamaster also plans to carve out a dedicated solar segment, aiming for a low double-digit revenue contribution by 2025, added RHB Research, which kept its “buy” call on the stock with a new target price of RM5.95 from RM6.16.
Phillip Capital Research also maintain a “buy” on the stock with RM6.10 target price based on an unchanged 35 times price-earnings multiple on 2025 earnings per share.
The research firm said management has revised the timeline for achieving its RM1bil-revenue target to 2026.
However, the earnings recovery projected for 2025 remains on track. ,
“Key risks to our ‘buy’ call include prolonged automotive and semiconductor market recovery and any unforeseen customer order delays,” said the research house.
