• Maintain SELL (TP: RM1.11). PMB Technology (PMBT) 12MFY23 core PATAMI of RM45.2mn was both above our and consensus estimates. 4QFY23 earnings surged to RM31.7mn (vs RM1.6mn in 3QFY23) thanks to a one-off gain of RM25.8mn of a parcel of land. Note that the figure was the price after considering the estimated expenses in relation to Proposed Disposal. To recap, the group announced the sale of the land in Klang for RM36.6mn in October 2023, where the land holds a 99-year leasehold tenure scheduled to expire in 2097. No dividend declared. Moving onwards, we deem a normalisation in earnings as per period before the production cut in China during mid-2021. Reiterate a SELL call on PMBT with TP of RM1.11 based on FY24F EPS of 2sen pegged at +2.0SD PER of 55.5x. We consider this fair, given the promising long-term prospects that could bolster increased demand, especially in the renewable energy and semiconductor sectors.

• Key highlights. Excluding the one-off gain, PMBT witnessed a decline in profit for its manufacturing and trading segment (-10.9% QoQ, -66.1% YoY) attributed to lower sales volume and higher operating costs. Similarly, the construction and fabrication segment also dragged by 3.8% QoQ and 45.3% YoY no thanks to slower progress of its ongoing projects.

• Earnings Revision. No earnings revision.

• Outlook. We anticipate a return to normalised earnings going forward, resembling the period before the metal silicon production cut in China in mid-2021. In near term prospect, we opine the rally in the Western market indices (especially Europe) towards the end of FY23 is only temporary amidst the supply constraints due to i) unforeseen reduction in domestic output and ii) trade disruption caused by militant attacks in the Red Sea. Currently, the China silicon metal spot price hover at 15,950CNY/MT compared to its peak of 67,300CNY/MT during September 2021.

Source: BIMB Securities Research - 27 Feb 2024