For those PENTA shareholders, who is attracted to its business, would have realized the first quarter result of PENTA had been released yesterday, and can be said to be on par, as the results represent a q-o-q increase of 138%!! (PAT increased from 3.1 million to 7.5 million). This should be the underlying reason why PENTA's share price had been on the rise over the past few months, But of course, for those who follow the quarterly report of PENTA over the past few years would have understood such growth is achievable. Today, our focus is not on its profit, but on the prospect of PENTA, where I would like to share a small finding on PENTA's Balance Sheet. 

First, we will discuss regarding the management's perspective on its prospect. Overall, they concluded that the demand for PENTA's product will continue to increase.

Next, I will share about my small findings from their latest balance sheet. I noted that there is a substantial increase in inventory for that quarter. From a business perspective, Inventories and Trade Receivables "eats up" business's operational cash flow. Logically, a well-managed business wouldn't have too much inventory as it locks down their cash flow, and if the inventory couldn't be sold off, this will affect the financials of the business operation. For the recent quarter, the inventory of PENTA is at an unprecedented level. The increase in inventory coincides with the increase in their payables, thus i can safely conclude that the inventory was purchased on a credit basis. Below is a chart showing the inventory  level of PENTA over the past few quarters since Q1 of FY2015.

From the chart we can see that over the past 8 quarters, the level of inventory had not exceeded RM20million. Yet, for the latest quarter, the outstanding inventory had a substantial increase to RM60million! A 4-5 fold increase compared to previous past 8 quarters' average levels! It is common for businesses to increase their inventory level if the management believes there is a demand to support it. So, maybe there is something we can expect from the next quarter result?

Please take note that the above simple analysis is solely my personal opinion, any investment decision to buy or sell is still your own responsibility. Hopefully this simple analysis will help you, and if there is any other opinion, please do drop a message as further discussion may result in different conclusion.

Lastly, hope that you can drop a like a the page below, thanks!

http://www.facebook.com/quantuminvestmentresearch/