Initiate Coverage With BUY; Master Of Smart Solutions
Pentamaster is a fast-growing automated testing equipment and factory automation solutions provider of renowned smart electronic devices brands globally.
In the face of rising prevalence of smart components inside electronic devices, we expect
demand for Pentamaster’s ATE to surge in the next few years.
Current valuation underestimates its 2018-21F net profit CAGR of 25%.
Initiate coverage with BUY and target price of HK$2.95.
VALUATION/RECOMMENDATION
Decent earnings growth ahead; initiate coverage with BUY. For 2018-21, we forecast Pentamaster’s revenue CAGR at 20%, mainly on rising demand for its ATE solutions.
Net profit CAGR is forecasted at 25% as the company will enjoy mild margin expansion on
operating leverage and product mix improvement.
Our target price of HK$2.95 is based on 15x 2020F PE, still a deep discount to Malaysian peers whose forward PE are >+1SD of their five-year mean.
RISKS
Risks include:
a) Uncertainty and instability in the global supply chain;
b) loss of key management and experienced personnel, and inability to hire enough engineering talents;
c) technology obsolescence;
d) keener-than-expected competition;
e) customer concentration risk; and
f) unfavourable forex rate fluctuations.
Source: UOBKH
https://research.uobkayhian.com/content ... 6459b675a9