KUALA LUMPUR (Dec 6): Phillip Capital has initiated coverage of Pentamaster Corp Bhd with a "buy" rating at RM4.56, and a target price of RM5.65, based on a target 35 times price-earnings (P/E) multiple on estimated earnings per share for the financial year ending Dec 31, 2024 (FY2024).

In a note on Wednesday, the research house said that trading at forward 28 times P/E, it sees opportunities on the back of positive views on the rising electric vehicle adoption trend, semiconductor sector recovery, and growing opportunities in the medical segment.

Phillip Capital said Pentamaster had consistently generated positive operating cash flows since FY2019, and had invested in capital expenditure with little borrowings.

The research house said the majority of the company's cash outflow can be attributed to dividend payments, with a yield of less than 1.0%.

It said while there is no official dividend policy, Pentamaster had distributed around 10% of its annual profit after tax for the past two years.

“We project a similar payout moving forward. Pentamaster has been able to demonstrate a stable cash flow, and generate a positive free cash flow in most years.

“Key downside risks include prolonged market recovery and any unforeseen customer order delays,” it said.