Background and Core Business

Pentamaster Corporation Bhd was listed in 2003 on Bursa under the Technology and Fledgling Index. It is categorised under the Electronic Equipment/Instruments sector. Through its subsidiaries, Penang based Pentamaster is a market leader in design and manufacturing of advanced automation systems mainly in the semiconductor and LED industries. These systems include Testers, Visual Inspection, Sorting and Handling machinery, both fully and semi-automated.  Another field of expertise is the design and manufacturing of Material Handling machinery, for example conveyor belts, industrial compactors, industrial lifters, sortation machinery, and even advanced Robotic arms used mainly in the rubber gloves industry that demand high levels of sterility.

Other business segments of Pentamaster include RFID Solutions and Hardware; Application software systems for Shop Floor, Warehouse Management; Centralised Machine Performance Analysis software and Smart Home Automation systems.

Last but not least, Pentamaster is also a packaging solutions provider by manufacturing of bags (woven, paper or PE), bagging and weighing machines along with placers.

Market capitalization of Pentamaster stands at RM175.88 million. They are currently in their 3rd quarter for FY2016 ending 31 December 2016. The latest 2nd quarter result has just been released early August 2016. Next quarterly results announcement should be on the month of Nov 2016 for Q3 results.

Financial Brief and Ratios (Historical)

Pentamaster has seen robust top-line growth for the past 5 financial years which contributed to spectacular net earnings and EPS growth. Over the years, production cost has been under control, leading Pentamaster to achieve increasing net profit margins.

At this juncture, PE ratio for Pentamaster is still considered low compared to other companies in the same industry, not to mention for companies in the Technology and Fledgling Indices. Shareholders’ funds experience a ROE of 18.44%, but there has not been a dividend payout since FY2007. Pentamaster is positively geared as revealed by its Total Debt to Equity ratio while their Balance Sheet is healthy, with minimal debts.

Free Cash Flow for Pentamaster is also positive. FY2016 has seen Pentamaster using some cash for capital expenditure, to the tune of about RM4.9 million and at the same time, raising some funds from issuance of share capital. This should be no cause for concern as a growth company like Pentamaster will need to seek additional funds to fuel its expansion.

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Pentamaster

Looking at weekly iVSAChart of Pentamaster for the past 6 months, we can clearly make out an uptrend in progress, beginning around early June 2016 when more Sign Of Strength (green arrow) indicators appeared.

Notice that low trading volume in a range bound movements between RM0.57 to RM0.70 levels since Feb 2016, this indicates smart money accumulation for a few months before the breakout in early Jun with accompanying volume. Stock price of Pentamaster has never looked back since and with the latest positive quarterly report, more investors are likely going to get into this stock.

It is interesting to note that although Pentamaster is at its all-time high, the volume seems to be diverging from this price action. This according to iVSA principles could signal weakness arising in the up move. Investors who wish to acquire Pentamaster at this stage should be cautious and be mindful of the risk-to-reward ratio.

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This article only serves as reference information and does not constitute a buy or sell call. Conduct your own research and assessment before deciding to buy or sell any stock. If you decide to buy or sell any stock, you are responsible for your own decision and associated risks.