Mercury Securities said that it has maintained a “Buy” recommendation on Pantech Group Holdings Bhd with a revised TP of RM0.90 based on FY23 Eps 9.3 sen and 9.7x in line with the 5-year average.
It said that it likes the stock due to its attractive dividend yield, and cheap valuations. The target price represents a potential return of 47.5% over the current price
It said that the key catalyst was the manufacturing and trading division, contributing 45% and 55% to total revenue for the current quarter. Deliveries to the local oil and gas sector were higher.
It said that Petronas has allocated 20% of the planned CAPEX over the next 5 years from FY 22 and this suggests a positive industry outlook adding a tally to the Group’s current order book of RM500 million as of June 30, 2022, expected to be fully recognised within 9 months to 1.5 years.
The stockbroking firm said that with more than 70% of the Group’s earnings derived from this sector, Pantech is in the right position to benefit from the Capex cycle adding that approximately 40% of the revenue from this sector comes from the maintenance of pipes, valves, and fittings (PVF), suggesting a strong recurring income.
In addition, Mercury said that it thinks that more contracts could be secured from the palm oil industry on the back of strong palm oil prices. It expects contributions from this segment to the company’s revenue to increase to 20% for FY23, up 4% from FY21. With more than 30,000 stock-keeping units (SKUs), the company is better positioned to meet rising customer demands.
