As  expected,  Pantech  posted  strong  FY13  net  profit  of  MYR55.0m (+59.4%  y-o-y). Earnings fell slightly q-o-q but this was normal as a few festive seasons fell in 4Q. We remain bullish on the company’s outlook as  we  believe  Management  has  plans  to  further  grow  the  company.  It declared a final dividend of 1.2sen per share, which was within forecast. Maintain BUY, with a MYR1.00 FV.

-  Strong  finale.  Pantech’s FY13 earnings of MYR55.0m (+59.4%  y-o-y) were  largely  in  line  with  our  MYR53.7m  forecast  but  slightly  below consensus’  estimate  of  MYR57.0m.  Earnings  fell  19.2%  q-o-q  but  we deem this as normal given that sales are typically slower in 4Q12 due to the  many  festivities.  The  trading  division  recorded  stronger  sales  of MYR384.1m  (+25%  y-o-y)  and  PBT  of  MYR59.8m  (+39%  y-o-y),  mainly buoyed by robust demand from oil and gas companies with their ongoing projects.  Meanwhile,  margins  from  the  division  improved  due  to  more efficient  cost  controls.  It  is  encouraging  to  note  that  the  manufacturing division’s  sales  and  PBT  soared  by  100%  y-o-y  and  247%  y-o-y respectively, fuelled by strong contribution from Nautic Steel and a better product mix at its carbon steel manufacturing segment. 

- Outlook  remains  bright.  We  are  confident  that  Pantech’s  outlook remains  bright  as  we  understand  that  Management  has  been  actively securing new contracts to improve the company’s earnings profile. We do not  discount  the  possibility  of  Pantech  looking  for  new  M&A  targets  to duplicate  Nautic  Steel’s success.  Management  indicated  it  has  plans  to boost  Nautic  Steel’s  production  capacity.  We  also  learned  that  its stainless  steel  plant,  which  had  weighed  down  the  group’s performance in  the  past,  finally  broke  even.  Hence,  we  expect  positive  contribution from this segment moving forward.

-  Maintain  BUY.  As  we  are  bullish  on  the  counter,  we  maintain  our  BUY recommendation  and  MYR1.00  FV,  pegged  to  9x  FY14f  diluted  EPS, assuming  all  its  shareholders  convert  their  irredeemable  convertible unsecured loan stocks (ICULS) before the 2017 expiry date.

Source: RHB