Key contributors for Pantech were from the manufacturing and trading division, contributing 52.7% and 47.3% to total revenue for the current quarter. Results were weaker due to slower delivery to local oil and gas projects and lower raw material prices resulting in lower product ASPs.
The current strong oil prices could strengthen and bring positive impact to its related capital activities such as increase spending in facilities maintenance and upgrading activities in the oil and gas industry. This will improve the demand for the company’s PVF products in the local and international market, said Mercury Securities (Mercury) in the recent report.
Petronas had allocated 20% of planned capital expenditure over the next 5 years from financial year 2022. This suggests a positive industry outlook, potentially adding tally to the group’s current order book of about RM300 million, expected to be fully recognised within 3 to 6 months.
With more than 70% of the group’s earnings derived from this sector, Pantech is in the right position to benefit from the capital expenditure cycle. Approximately 40% of the revenue from this sector comes from the maintenance of pipes, valves, and fittings (PVF), suggesting a strong recurring income.
Pantech supplies PVFs to the palm oil industry. Mercury believes that more contracts could be secured from the palm oil industry on the back of strong palm oil prices. With more than 30,000 stock keeping units, the company is better positioned to meet rising customer demands. Key risks identified by Mercury include fluctuation of steel and nickel prices, labour shortages, and slower-than-expected contract flow.
