Company Background. Pantech Group is principally engaged in the business of trading pipes, valves & fittings (PVF) and manufacturing of pipes, fittings & galvanising. The group serves customers in over 70 countries and operates in 10 locations across Malaysia, Singapore and United Kingdom. Pantech also owns one of the largest galvanising bath in Southern Peninsular Malaysia.

Prospects. (i) Supply a wide and diverse range of PVF products to cater for specific needs of oil & gas (onshore and offshore), marine, palm oil, refinery, energy, process industrial/petrochemical and chemical industries, (ii) Higher oil prices will boost capital expenditure activities like facility maintenance and upgrades in the oil & gas industry, driving increased demand for the group’s products, and (iii) Bolstering the group’s manufacturing capacity and revenue starting this year with the completion of the acquisition of Unity Precision Engineering.

Financial Performance. In 1QFY24, Pantech reported a higher revenue of RM244.7mil (+24% QoQ) with PAT of RM27mil (+14.5% QoQ) due to better product mix. In FY ending Feb 2023, the group recorded a strong revenue growth of RM1.03bil (+38% YoY) with PAT of RM115.6mil (+61% YoY). This was mainly attributable to higher deliveries to local oil & gas projects and improved sales demand from the export market of the manufacturing division.

Valuation. Pantech is currently trading at an attractive 6.2x trailing P/E, versus Bursa Energy Index’s 5-year forward average of 24x. As a comparison, Engtex Group, involved in the distribution/wholesale of PVF and steel-related products as well as manufacture of steel PVF & industrial casting products, trades at a much higher 56x trailing P/E.

Technical Analysis. Pantech may trend higher after breaking the RM0.84 resistance and hit a new 52-week high 3 weeks ago. With 20-day EMA remaining above the 50-day EMA since a bullish crossover in early August, the uptrend may continue in the near term. A bullish bias may emerge above the RM0.84 level, with stop-loss set at RM0.79, below the 50-day EMA. 

Source: AmInvest Research - 25 Sept 2023