PETALING JAYA: Pentamaster Corp Bhd
’s earnings outlook remains mixed as the earnings per share (EPS) upside from its medical unit will be negated by continued drag from the automotive industry.
CGS International (CGSI) Research cut its financial year 2024 (FY24) to FY26 EPS by 17% to 24% to reflect lower sales volume assumptions for Pentamaster’s burn-in tester equipment catering to automotive semiconductor companies.
This is also partially offset by higher medical revenue growth in FY24 to FY26, following the group’s results release for the second quarter of 2024 (2Q24) and the research house’s meeting with the management last month.
“We now expect EPS in the second half of 2024 (2H24) to be flattish but view the group’s current outstanding order book of about RM400mil (as at end-2Q24) should sustain revenue visibility in 2H24, anchored mostly by its medical segment.
“We believe the strong medical segment revenue momentum in 1H24 could continue into 2H24 as its main medical customer continues to expand capacity following the US Food and Drug Administration approval on a new medtech product,” CGSI Research said in a report yesterday.
Pentamaster has also on-boarded two new medtech customers in 2Q24 (to a total of six). The research firm said overall, it projects the group’s medical segment’s revenue contribution to grow from 21% in FY23 to 39% in FY24.
Nevertheless, CGSI Research added that near-term automotive demand weakness may persist on weak consumer sentiment and elevated inventory levels.
“We project Pentamaster’s automated testing equipment (ATE) revenue contribution to fall from 64% in FY23 to 43% in FY24, before recovering to 48% by FY26,” the research house said.
CGSI Research maintained a “hold” call on Pentamaster with a lower target price of RM4.15. Upside risks are sharp recovery in the group’s auto and mobile-related ATEs and rapid market share increase in its medical business.
