Pensonic (9997) achieved an awesome quarterly result ended November 2015. Net profit increase from RM 598k to RM 2.7million. In other words, the net profit had increased by 350% / 4.5 times. The increasing of net profit is mainly due by cost saving and appreciation of USD.

PE Ratio Valuation Approach

2015-05-31, there is a RM 8.4million disposal gain. If we take off the one-off gain, the EPS would be 3.24 cents (in bracket of the above table)

If we exclude the one off gain, Pensonic EPS was 8.78 cents.

Pensonic is under consumer sector. Currently consumer sector average PE ratio is about 15x.

With 15x, Pensonic target price would be RM1.32

TP : RM1.32

Dividend Valuation Approach

For the past 1 year, Pensonic given two times dividend. First is 1.5 cents, second is 2 cents.
We know that in current banking Fix Deposit the highest interest is 4.5% (Maybank promotion rate). With this rate guidelines, we want to get same rate in pensonic so what is the reasonable price for pensonic stock?

3.5cents / 0.045 = 78cents

With 78cents, every year we get 3.5 cents dividend. We got 4.5%.

I expect pensonic dividend will be increase to 4 – 4.5cents this year as the company cash position getting stronger.

If the company giving 4.5cents dividend, what is the reasonable price to buy in?

4.5cents/0.045 = RM1.00

So, this year pensonic target price would be RM1.00 with dividend valuation approach.

TP : RM1.00
 

EXPANSION

Pensonic new factory had just opening in October. This factory had increase the company capacity and yet the result had not include in current quarterly yet. It may only reflect in the next quarter. It will help the company to increase 50% in revenue and profit.

Let’s do an assumption, if the expansion increase revenue and profit by 50%
Last year EPS 8.78 cents

8.78 cents + 50% = 13.17cents

13.17 cents x PE 15 = RM1.98

So, our Target Price after including the expansion is RM1.98

TP : RM1.98

CONCLUSION

WE ARE USING THREE METHOD TO CALCULATE THE INSTRINSIC VALUE FOR PENSONIC (9997). IT’S SHOW THAT THE SHARE PRICE WAS DEEPLY UNDERVALUE WITH TARGET PRICE OF RM 1.32,  RM 1.00 & RM1.98. THE AVERAGE TARGET PRICE WAS RM1.43

IN CONCLUSION, I HAD GIVE PENSONIC HOLDINGS BERHAD A TARGET PRICE OF RM1.43.

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