KUALA LUMPUR (April 17): Pipe-and-valve maker Pantech Group Holdings Bhd is expected to report higher quarter-on-quarter net profit when it announces its results next week, said TA Securities.

Core net profit is anticipated to be in the RM24 million-RM28 million range for the three months ended Feb 29, 2024 (4QFY2024), according to TA Securities, one of only two research houses covering the stock. That compares with RM30 million in 4QFY2023 and RM20 million in 3QFY2024.

“We are sanguine on the outlook for Pantech,” said TA Securities in a preview note ahead of the earnings announcement expected on April 25. Stronger oil prices are expected to drive capital expenditure at upstream and increase demand for Pantech’s products, it noted.

Philip Capital, the other analyst covering Pantech, projected core net profit at a similar range of RM23 million to RM28 million for 4QFY2024, citing higher export sales volume and average selling prices.

Pantech shares have racked up an 11% gain so far this year, with both TA Securities and Philip Capital recommending a “buy” call on the stock. The stock rose two sen or 2% to RM1.02, valuing the company at RM832.84 million at 10.10am on Bursa Malaysia.

Brent, the global benchmark for crude oil, has climbed above US$90 per barrel as Iran launched retaliatory strikes on Israel over the weekend. The Iranian strikes were in response to an airstrike on the Iranian consulate in Damascus, Syria on April 1, attributed to Israel, which killed several military officers and some civilians.

The oil and gas sector remains a key contributor for Pantech, consistently making up more than 50% of its revenue, TA Securities said. Demand for Pantech’s products will also be driven by downstream growth from government policies and plans, the research house said.

Under the New Industrial Master Plan 2030, the government intends to move Malaysia up the value chain to specialty chemicals from basic chemicals, while the Chemical Industry Roadmap 2030 is expected to increase the sector's gross value add to the overall economy to more than 4.5% by 2030 from 3.4%.

Further, the Pengerang Integrated Petroleum Complex is expected to secure RM60 billion worth of investments in phase three between 2026 and 2031, including for the construction of bio-refineries and facilities producing nitrile-related products.

“Pantech is the key beneficiary as the group is the market leader in the pipe, valve and fitting business in Malaysia,” TA Securities said.

Pantech’s reported net profit fell 38.98% to RM21.15 million in 3QFY2024 on revenue of RM221.44 million, which the company blamed on softer sales for both its trading and manufacturing divisions.