Introduction
Pantech Group Holdings Berhad (5125) is a supplier of pipes, fittings, flanges, valves and other component products. The company serves across a wide range of industries such as oil and gas, plantations, power, water, refinery and petrochemical plants and the products are mainly manufactured for industrial purposes.
The company operates a manufacturing plant producing stainless steel-welded pipes and fittings in Pasir Gudang, a major transport and logistics hub for regional O&G activities. The site is also at close proximity to the soon-to-be major petrochemical hub at Pengerang, Johor.
Pantech was listed on the Bursa Malaysia back in February 2007.
Fundamentally
Like all service and manufacturing companies in the O&G sector, Pantech's fate relies heavily on the global O&G CAPEX budget from major oil companies. Domestically, PETRONAS has been investing heavily on many development projects, especially on the marginal oil field development front.
The trading and manufacturing business is not particularly exciting as profit margins are usually low and competition is intense due to weak product differentiation in the steel-related product market. O&G sector is also a cyclical business where investment decisions are significantly influenced by oil prices.
Moving up the supply chain - While trading remains the backbone of the Group's business, Pantech has gradually been building up its manufacturing capacity for different steel products catering to domestic industry needs as well export demands. Going forward, the company has plans to move into the production of alloy and other high-yield products. This allows the company capture higher profit margins along the supply chain.
Financially
5-year Financial Summary - Historical financial performance suggests that company's performance is still largely dependent on industry's cyclical trend. Recent recovery in financial performance however may suggest that business outlook has somewhat turned more favorable especially with ongoing ETP project spending on the O&G front.
- Trailing PE for the 9-month ended November 2012 is around 10.5 times (annualized ~ 8 times) *
- Dividend History - 3 interim dividends declared for the period amounting to 3.4 cents with a final dividend to be declared. Current dividend yield translates into 4.6%. *
- Latest Net Assets per share is RM0.74 - trading at 1x Book value. *
*Based on today's closing price of RM 0.74
Technically
Technical reading remains favorable at this stage. Recovery has been steady and this is confirmed by continuous build-up in trading volume.
A major reading for the pattern of mid to long term bullish trend (3mth - 12mth) of the counter was spotted in Feb'12, Aug'12 and Jan'13 with RSI reading breaking above the 80% level whereas subsequent retracements remained above 30% level. Recent RSI spike to 88% suggests that a more accelerated price movement with upward bias is likely to occur.
Technically, this counter has enough momentum to re-test its historic high of RM1.10 recorded back in Jan'07. Immediate target is set at RM1.07.
Catalyst
- The major driver is likely to come from the ongoing development of the Pengerang Petrochemical Complex in
Pengerang, Johor.
- Weak results from PETRONAS in the latest announcement - indication of more reinvestments are required to
bump up future earnings.
- Recovery in global oil prices against the backdrop of stronger global economy.
