Pantech Group Holdings Bhd’s (PANTECH) 1QFY25 results were in line with expectations. 1QFY25 core net profit of RM29.4mn (+7.9% QoQ, +26.1% YoY) came in at 30% of ours and 26% of consensus’ full-year forecasts.
The group proposed a first interim dividend of 1.5sen/share, same as corresponding period last year.
YoY: 1QFY25 PBT dropped 1.2% YoY dragged by Manufacturing segment (PBT -13.4% YoY), weighed down by unfavourable foreign exchange rate for the export market. This is despite better product mix for the Trading division (PBT +14.6% YoY).
QoQ: Revenue increased by 11.3% QoQ driven by better sales growth in both Manufacturing division (+10.2% QoQ) and Trading division (+12.6% QoQ). However, PBT dropped by 1.5% QoQ. The lower PBT was mainly due to higher operating expenses.
Impact
After incorporating FY24 audited numbers, we adjust our FY25-FY27 earnings forecasts marginally by 0.0%-0.1%.
Outlook
To recap, PANTECH plans to list its wholly-owned subsidiaries in the Manufacturing division, Pantech Stainless & Alloy Industries Sdn Bhd and Pantech Steel Industries Sdn Bhd on the Main Market via a special purpose vehicle by year-end. The listing will likely lead to immediate earnings dilution. Assuming listing of 30% stake, profit of RM50mn per annum from both subsidiaries, no additional earnings growth from the listing, 12x listing PE and 3% interest rate, this is expected to dilute EPS by 1.1sen/share.
Nonetheless, we are sanguine on the long-term outlook of PANTECH due to (i) resilient oil prices encouraging upstream capex; and (ii) downstream growth from policy supports such as the New Industrial Master Plan 2030 and the Chemical Industry Roadmap 2030.
Valuation
Reiterate Buy with a higher TP of RM1.27/share pegged to 10x CY25 EPS as we incorporate an ESG Premium of 3%. PANTECH presents as an attractive dividend play, offering more than 5.0% dividend yield for FY25- FY27, supported by free cash flow yield of above 10%.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....