20200304-软库中华金融服务-槟杰科达-01665.HK-No_one_can_be_independent_of_a_macro_turmoil_9页_673kb

Pentamaster (01665.HK) 2019 Performance Summary

Core Content

Pentamaster (01665.HK) reported a 16.8% YoY revenue increase to MYR 487.1mn in 2019, driven by strong performance in the Automated Test Equipment (ATE) segment and challenges in the Factory Automation Solutions (FAS) segment. The gross margin expanded by 4.1p.p. YoY to 36.8%, contributing to a 31.4% YoY growth in the bottom line. The overall performance was in line with expectations, supported by the resilience of the ATE segment amid the trade war.

Key Financial Highlights

• Revenue breakdown:

  • ATE segment: MYR 422.5mn (25.0% YoY growth)
  • FAS segment: MYR 64.6mn (18.4% YoY decline)

• Gross margin: 36.8% in 2019 (up from 32.7% in 2018), with a 1.1p.p. expansion in Q4.

• Net profit: MYR 131.4mn in 2019, representing a 31.4% YoY growth.

• EPS: Increased from MYR 0.06 in 2018 to MYR 0.08 in 2019.

• Profit forecast adjustment: The analyst cut the profit forecast by 3.4%–4.7% due to macroeconomic uncertainties.

• Target price: Adjusted to HKD 1.86, implying 12.0x/10.8x/9.3x P/E ratios for 2019–2021.

Main Segments Performance

ATE Segment

• Performance: Strong, with 69.3% of total revenue coming from the telecom industry in 2019.
• Drivers: Repeat orders, release of new consumer electronics products, and revenue from active alignment assembling equipment for 3D sensor modules.
• Contribution: Led to a positive overall performance despite FAS segment weakness.

FAS Segment

• Performance: Dragged down by delayed revenue recognition and declining demand.
• Challenges: Impact of Coronavirus (COVID-19) on project completion and acceptance testing.
• Opportunities: Expansion into new energy vehicles market and automotive industry through new test equipment deliveries.

Macroeconomic Impact

• Trade War: Continued to affect the business environment, but ATE segment remained resilient.
• Coronavirus (COVID-19):
  • Delayed production in China, Japan, and Korea.
  • Suspended work in key regions, affecting supply chains and global component availability.
  • Reduced demand for end products such as smartphones and automobiles, with a slow recovery expected.
• Risk factors:
  • Global spread of Coronavirus.
  • Slow progress in resuming work in China.
  • Suspension of work in Korea and Japan.
  • Escalating US-China trade tensions.

Long-Term Prospects

• Positive outlook: The analyst maintains a "Hold" rating due to uncertainties in the short to mid-term.
• New technology development: The Group is actively developing test equipment for 5G, 3D sensing, and new energy vehicles, positioning itself for future growth.
• Strategic moves: Acquisition of TP Concept and expansion into automotive and new energy markets enhance long-term potential.

Peer Comparison

Financial Ratios

Key Risks

• Coronavirus (COVID-19): Global spread may delay production and affect supply chains.
• Trade war: Ongoing tensions may continue to impact the business environment.
• Economic slowdown: May lead to weaker demand for end products.
• Revenue recognition delays: Due to project completion issues and acceptance testing delays.

Analyst Notes

• Recommendation: Hold
• Target price: HKD 1.86
• Current price: HKD 1.71
• 12-month price range: HKD 0.82 – 2.43
• Market cap: 2.7bn HKD
• Trading volume: 30 days avg. 2.8mn
• Free float: 36.3%

Summary

Pentamaster (01665.HK) delivered a 16.8% revenue increase in 2019, with the ATE segment contributing MYR 422.5mn (25.0% YoY growth) and the FAS segment showing a 18.4% YoY decline. The gross margin expanded by 4.1p.p. YoY to 36.8%, leading to a 31.4% YoY growth in net profit. Despite macroeconomic challenges, including the trade war and Coronavirus (COVID-19), the Group maintained a positive long-term outlook through innovation in new technology and expansion into the automotive industry.

The analyst downward adjusted the target price to HKD 1.86, reflecting short-term uncertainties and revised profit forecasts. The "Hold" rating is based on the expectation of a slow recovery and potential weaker demand due to the global economic environment.

The peer comparison shows that Pentamaster has a lower market cap and lower P/E ratios compared to its counterparts, but its gross margin and ROE are comparatively strong.

The financial ratios indicate a healthy liquidity position, with increasing current and quick ratios and stable debt-to-equity ratios.

Overall, while the short-term outlook remains cautious, the long-term potential is positive, driven by new technology development and market expansion.