Target Price: MYR1.43
Staying On Track
Pantech (PGHB)’s 2QFY14 net earnings of MYR15.3m (+11.2% q-o-q, +7.0% y-o-y) came in within our and street estimates. Although the quarter’s revenue fell, margin improved on higher contribution from its manufacturing arm. The company has declared a 1.2 sen interim dividend. We revise lower our topline assumption while maintaining our full-year earnings forecast. Maintain BUY, with our FV at MYR1.43.
- Earnings in line. PGHB’s 1HFY14 net profit of MYR29.1m (+8.6% y-o-y) was largely in line with our and consensus estimates. Contribution from its trading division softened during the half-year due to weaker sales in the O&G sector as project execution slowed, operating expenses rose and it changed its product mix. Nonetheless, the manufacturing division showed satisfactory growth as it boosted output from all its manufacturing plants to cater to the increase in local and export sales demand. Owing to better niche product sales, this division recorded healthier margins.
- Revising topline forecast. Management has guided that its topline may weaken this financial year due to the slower execution of projects. This prompts us to revise lower our forecast revenue to MYR640m/MYR746m from MYR733m/MYR850m for FY14F/FY15F. Meanwhile, we revise higher our margin assumption, particularly for PGHB’s manufacturing arm, which is making good progress in expanding into niche products that command better margins. All in, we are still positive that PGHB would be able to meet our full-year earnings forecast of MYR63.5m.
- Dividend. PGHB declared a 1.2 sen dividend for 2QFY14, which brings its accumulated dividend for 1HFY14 to 2.4 sen. If the company maintains this payout in 2H, this may translate into a dividend yield of 4.5%.
- Risks. A drastic drop in oil prices and a halt in O&G activities could dampen the demand for the company’s products and hurt its earnings.
- Maintain BUY. As we are still bullish on PGHB’s outlook, we maintain our BUY recommendation on the counter, with our MYR1.43 FV unchanged and pegged to a 13x FY14F P/E.
Publish date: 24/10/13