Pantech - Hearty Results Expected
Date:
2013-07-22
Firm:
RHB
Stock:
Price Target:
1.43
Price Call:
BUY
Last Price:
1.03
Upside/Downside:
+0.40 (38.83%)
We expect Pantech (PGHB) to report healthy 1QFY14 results in the middle of this week, boosted by favourable macro factors. We also expect all its business arms to make positive contribution. As we think the US anti-dumping issue should only make minimal impact on the Group, we continue to like PGHB’s growth potential. Hence, we maintain our BUY call, with our MYR1.43 FV pegged to a 13x FY14F P/E.
- Macro factors benign. With both local and global oil majors pumping new investments into the oil & gas (O&G) sector, we believe PGHB will see positive sales growth as the oil majors’ high O&G capex should translate into high demand for the Company’s products. Moreover, the fact that average oil price is hovering above USD90 per barrel also supports our view that O&G capex should remain healthy.
- All divisions to pull their weight. In 1QFY13, PGHB’s stainless steel division was incurring losses, which dragged down Group performance, while its subsidiary Nautic Steel was still in its infancy. For 1QFY14F, we expect to see slight earnings contribution from the stainless steel division, which broke even in 4QFY13. Although the contribution from this unit may be small, it is heartening to note that it has stopped bleeding. After having operated 12 months in the UK, we believe PGHB has overcome the learning curve in managing Nautic Steel; hence, we believe the Company may report heartier numbers. All said, given the strong foundation laid by its trading and carbon steel fittings manufacturing arm, all of PGHB’s businesses now contributing positively. As such, we expect positive earnings growth in 1QFY14.
- US anti-dumping measures may be blessing in disguise. We continue to believe that the US anti-dumping measures on Malaysia’s stainless steel welded pipes should make only minimal impact on PGHB’s earnings. To counter this issue, PGHB has actually ramped up its production of stainless steel fittings, which usually fetch wider margins than pipes. Hence, we think such a measure should be adequate to offset the decline in the pipes sales, and may even boost the Group’s earnings.
Source: RHB
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We expect Pantech (PGHB) to report healthy 1QFY14 results in the middle of this week, boosted by favourable macro factors. We also expect all its business arms to make positive contribution. As we think the US anti-dumping issue should only make minimal impact on the Group, we continue to like PGHB’s growth potential. Hence, we maintain our BUY call, with our MYR1.43 FV pegged to a 13x FY14F P/E.
- Macro factors benign. With both local and global oil majors pumping new investments into the oil & gas (O&G) sector, we believe PGHB will see positive sales growth as the oil majors’ high O&G capex should translate into high demand for the Company’s products. Moreover, the fact that average oil price is hovering above USD90 per barrel also supports our view that O&G capex should remain healthy.
- All divisions to pull their weight. In 1QFY13, PGHB’s stainless steel division was incurring losses, which dragged down Group performance, while its subsidiary Nautic Steel was still in its infancy. For 1QFY14F, we expect to see slight earnings contribution from the stainless steel division, which broke even in 4QFY13. Although the contribution from this unit may be small, it is heartening to note that it has stopped bleeding. After having operated 12 months in the UK, we believe PGHB has overcome the learning curve in managing Nautic Steel; hence, we believe the Company may report heartier numbers. All said, given the strong foundation laid by its trading and carbon steel fittings manufacturing arm, all of PGHB’s businesses now contributing positively. As such, we expect positive earnings growth in 1QFY14.
- US anti-dumping measures may be blessing in disguise. We continue to believe that the US anti-dumping measures on Malaysia’s stainless steel welded pipes should make only minimal impact on PGHB’s earnings. To counter this issue, PGHB has actually ramped up its production of stainless steel fittings, which usually fetch wider margins than pipes. Hence, we think such a measure should be adequate to offset the decline in the pipes sales, and may even boost the Group’s earnings.
2013-07-23 06:46