We maintain BUY on Pantech,  with  an unchanged  MYR1.25  TP  (28.9% upside, 12x FY15F P/E). Its 1HFY15 (Feb) earnings were in line,  and we expect  the numbers to pick up in 2H. Pantech’s manufacturing division slowed  down  in  2QFY15  due  to  weaker  export  sales.  Management guided that it has  secured  its first RAPID-related contract and  remains confident that the company may possibly win more in the future.

Within  expectations.  Pantech’s  2QFY15  numbers  came  in  within  our and consensus forecasts  and we believe its 2H performance could be a stronger one. As highlighted in our results preview report on 16 Oct titledPantech: Look Beyond FY15,  its  2QFY15 net profit of  MYR13.4m was flattish  on  a  QoQ  basis  (-1.4%)  but  fell  12.5%  YoY.  The  weaker performance in 2QFY15 was mainly due to  a  lower contribution from  its manufacturing division, which was offset by the improved performance of its trading arm. Pantech declared  a 1-sen single-tier interim dividend for the quarter under review – which came within our expectations. 

Export  sales  slow  down.  For  2QFY15,  manufacturing  sales  were flattish  (+0.7%  QoQ)  but  pre-tax  profit  slipped  to  MYR8.3m  from MYR10.7m in 1QFY15 mainly due to the economic  slowdown in Europe. We believe that the numbers could recover in 3QFY15.

Secures first RAPID-related contract. Pantech highlighted in its results announcement  that  the  company  has  secured  its  first  supply  package related  to  the  Refinery  and  Petrochemical  Integrated  Development (RAPID) project. Going forward, management believes that the group will have more opportunities to supply for these projects.

Look beyond FY15. We think that Pantech’s outlook remains  bright for the  longer  term.  W ith  its  improved  margin,  we  are  confident  that  its earnings could rise to new highs once oil & gas activities begin to pick up again.

Maintain  BUY.  As  we  are  still  upbeat  on  the  company’s  long-term outlook, we maintain our BUY call and TP of MYR1.25, based on  a 12x FY15F P/E. We make no change to our earnings forecast.

Source: RHB