Bcos of economic slowdown from covid, many chemical companies have slow down their investment to increase their capacity. Now demand coming manufacturing, cables and automotive have exceeded supply and not sufficient to support the demand for this region.
CIMB is putting chemicals counter as overweight and slated to outperform as recovery stock in 2H21.
Market will always be volatile that's why only invest in company with good fundamentals.
With solid orders in hand, especially for higher-margin semiconductor and smartphone-related products, Pentamaster Corp Bhd seems to be well-positioned to make a comeback this year. The cash-rich Penang-based company has already begun its financial year 2021 with a 15% jump in sales in the first quarter (Q1), although it was not spared from the sector-wide margin pressure. The company also benefits from the ongoing semiconductor industry “supercycle” as market demand exceeds global supply.
Pentamaster Corp We forecast stronger sales contribution from the electro-optical division in FY21F, driven by a higher conversion rate of prototypes into recurring sales. For example, the group indicated it received a sizeable order for its new 3Dmagnetometer sensor, which goes into touchscreen applications. Pentamaster’s order book hovered at the RM230m level as of early-May. In spite of the ongoing impact of chip shortages and higher raw material cost, the group is upbeat about stronger sales and earnings recovery from 2Q21F onwards, driven by an improvement in sales mix towards higher margin solutions in electro-optical and automotive segments.
We see Pentamaster primed to benefit from the structural shift from the accelerating adoption of silicon carbide and gallium nitrate power products in EVs and smartphone fast chargers, given its early-mover advantage and experience in the power semiconductor market. The group aims to increase its exposure in the automotive segment from 16% in FY19 to 30% over the next 3-5 years.
The group is investing RM25m to set up a new plant in Batu Kawan, with an additional 100k sq ft of floor area, to support its factory automation solution (FAS) and medical device segment expansion from FY22F onwards, given that its existing plants in Bayan Lepas and Batu Kawan are running at nearly 100% and 75% capacity utilisation, respectively. The group remains upbeat on its medical device segment, which it projects will contribute 30% to its FY23F revenue. Overall, we project the group to deliver a 3-year EPS CAGR of 18%. Retain Add, with a RM5.85 TP, still based on 36x CY22F P/E, +0.5 s.d. above the sector mean.
We explore Edgenta’s foray into digital healthcare, which begins with the launch of QuickMed (a digital healthcare platform aimed at digitalising healthcare practices in Malaysia). While we have yet to factor in any financial impact from the digital health ventures for the time being, we raise our FY21/22 earnings forecasts by 52.7/65.5% (amid a low base) to account for earnings recovery in Edgenta’s core businesses. After tweaking our SOP-derived valuation methodology and rolling over our valuation year, our TP rises to RM2.53 from RM2.00. Maintain BUY.
Edgenta’s core business currently involves facilities management for the healthcare and infrastructure sectors, which historically accounted for ~45% and ~35% of revenue over the previous 5 years. With Edgenta’s success in adopting technology in their healthcare support services operations, digital healthcare is the logical next step. In this report, we explore Edgenta’s planned digital healthcare ventures going forward.
QuickMed. QuickMed is a platform launched by Edgenta to help healthcare providers digitise their operations and connect to the internet (i.e. their target user base are healthcare providers). QuickMed’s digital solutions include storage of data on cloud, automation of billing, and more. We reckon Edgenta will need to acquire a sizeable user base before these ventures can be monetised effectively.
Potential longer-term business model. We believe QuickMed will be the start of a comprehensive digital healthcare journey. While it is still unclear what monetisation strategies Edgenta will purse, it may come in a few forms, namely: (i) subscription fees from healthcare providers using the QuickMed platform for operations, (ii) selling medical products to users online, (iii) charging fees for value adding services within the platform such as virtual consultations, (iv) charging referrals fees to clinics that patients find via Edgenta’s platforms, (v) selling membership packages to users, (vi) selling wellness packages to users.
Ideal management team. We are enthusiastic about Edgenta’s appointment of Mr. Syahrunizam Samsudin (Managing Director & CEO) in mid-FY20 given his formidable track record in launching and growing digital ventures. Note that during his time at Touch ‘N Go, Mr. Samsudin successfully launched TNG e-wallet as a JV with Ant Financial (affiliate company of Alibaba) which grew to become the largest e wallet in Malaysia.
Forecasts. As Edgenta’s digital healthcare ventures are still in its infancy, we do not factor in any financial impact from the digital health ventures for the time being. However, we raise our FY21/22 earnings forecasts by 52.7/65.5% (amid a low base) to account for earnings recovery from the Infrastructure services division from road maintenance works pushed back into FY21 from Covid-19 disruptions on operations in FY20.
Maintain BUY. We take this opportunity to roll over our valuation year and tweak our SOP valuation methodology (Figure #6). All in all, our TP rises to RM2.53 from RM2.00. In the shorter term, we reckon the share price will be driven by (i) recovery in the infrastructure services earnings from roadworks pushed back from FY20 (ii) projected FY21 healthy dividend yield of 4.8%.
Source: Hong Leong Investment Bank Research - 10 May 2021
Yesterday, Top Glove announced that the group is committed to a special dividend of 20%, in addition to its existing dividend policy of 50% dividend pay-out ratio, for 2QFY21 to 4QFY21. As such, the 70% dividend pay-out ratio on PATAMI will commence from 2QFY21.
To recap, Top Glove declared a first interim dividend of 16.5sen/share in 1QFY21, representing a pay-out ratio of 55.7%. In tandem with this special dividend announcement of 20% for 2QFY21 to 4QFY21, we raise our FY21F dividend pay-out to 66.5% from 55% previously. At current share price, the stock is expected to offer an attractive dividend yield of 18.4% for FY21F.
Klang Factories Fully Ramp Up
In terms of earnings, recall that despite a flattish growth in gloves production in 1QFY21 (i.e., 0.05% QoQ to 17.97bn), Top Glove recorded a PAT of RM2.38bn (+83.9% QoQ) due to higher ASP of 57%. Recall that Top Glove worker’s dormitories in Klang were under the Enhanced Movement Control Order (EMCO) from 17th November 2020 to 14th December 2020, which affected circa-50% of Top Glove’s total production capacity. Due to the timing of the EMCO, we note that the earnings impact is spread in 1QFY21 and 1QFY22.
According to management, the affected plants have all resumed operation on 20th December 2020 and all the plants are currently operating at full capacity. As such, we expect gloves production in 2QFY21 to be higher QoQ due to the additional capacity. More importantly, ASP for 2QFY21 has increased by circa-30% QoQ.
Given the stronger-than-expected ASP, we now expect Top Glove to record a profit of RM12.5bn for FY21, which is 7.1 times more than FY20 profit of RM1.75bn.
Just this week alone EPF & KWAP has been buying more than 9 million over shares. If you check their previous transactions, they have been buying consistently for many months now. Now EPF hold about 10% and KWAP about 8%. I think oil is gearing for the uptrend.
YTL’s share price is looking technically interesting following a pullback of 22% from its recent high of RM0.83 in midDecember last year. At the last traded price of RM0.65, the stock is not far away from its March 2020’s trough level of RM0.58 with further downside risk supported by a horizontal line that stretches back to September last year.
As the shares approach the RSI oversold zone, a technical rebound is anticipated when the stock climbs above the oversold threshold going forward.
That being the case, the share price will probably bounce up to reach our resistance targets of RM0.72 (R1; 11% upside potential) and RM0.80 (R2; 23% upside potential).
We have pegged our stop loss price at RM0.59 (which represents 9% downside risk).
Fundamentally speaking, YTL – a conglomerate that is involved in multiple businesses ranging from utilities, cement manufacturing & trading, construction, property investment & development, hotel operations to information technology & ecommerce – is forecasted to register net profit of RM108m in FY June 2021 and RM193m in FY June 2022 based on consensus numbers. This translates to forward PERs of 66x and 37x, respectively.