• An established automated equipment manufacturer with diversified exposures to various sectors such as semiconductor industry (contributed 60- 70% to sales), medical devices, F&B, LED, wireless, commercial products, automotive etc.
• Share prices tumble 22.8% in six days. In tandem with profit taking consolidation among export-oriented semiconductor companies following pullback in US$ vs RM, PENTA’s share prices corrected 22.8% from a 52- week high of RM0.745 (21 Apr) to a low of RM0.575 on 28 Apr before ending at RM0.62 yesterday. The selldown was mainly attributed to a 17% qoq decline in earnings during a seasonally weak 1Q15 quarter.
• Look beyond 1Q15. Management guided 2015 revenue to reach circa RM100m due to increased orderbook and acceleration in delivery of order backlog amid bright semiconductor outlook, diversification in new customers and product offerings coupled with better controllable cost structure in place.

• Likely to play catch-up against its peers amid cheap valuations at 10.7x FY15 PE against 10-year historical average of 15x. In terms of P/B, PENTA’s 1.3x P/B is also trading at a huge 56% discount to semicon equipment peers and 66% to chips assembler. A conservative 12x PE against 2015 EPS of 6.4sen will peg PENTA’s price at RM0.77, offering another 24% upside potential.
• Selling overdone. On technical front, share price is expected to reverse its recent six consecutive of black candlesticks, following the bullish “Bottom up” hourly chart and positive white candlestick in the daily chart.
• A decisive break above RM0.65 (23.6% FR) could see next resistances at RM0.70, with long-term objective of RM0.745. However, failure to maintain above immediate supports of RM0.59 (38.2% FR) and RM0.56 (uptrend line) on any pullback will turn overall picture into negative sentiment. Cut loss below RM0.555.

Source: Hong Leong Investment Bank Research - 30 Apr 2015