Pentamaster gets 'Buy' at RM6.16, to ride semicon recovery – The Malaysian Reserve
Thursday, June 27th, 2024
at Breaking News | Markets | News
Penang-based Pentamaster Corp Bhd has been given a ‘Buy’ call with a 52-week target price of RM6.16 at RHB Research.
The counter closed yesterday at RM4.93 (52-week high/low RM5.56/RM3.95), valuing the company at RM3.51 billion.
“We are optimistic about Pentamaster Corp’s near-term earnings potential, driven by heightened demand in the factory automation solutions (FAS) segment and the recovery in the semiconductor space in the early upcycle, which should boost its automated test equipment (ATE) unit,” the research house said in a note released today.
It has forecast a 3-year (FY24-26F) earnings CAGR of 18.2%, mainly driven by the growth of the medical devices unit, coupled with the recovery of the automotive and semiconductor segments.
Pentamaster provides integrated and customised solutions, serving customers across industries ranging from semiconductor, computer, automotive, electrical & electronics, pharmaceutical, medical devices, F&B, consumer electronics to general manufacturing.
The report said the group has a healthy balance sheet and net cash of RM490 million (RM0.69 per share) as of FY23.
It noted that the automotive market was revving back to life.
“The automotive chip market is set to undergo exponential growth with power semiconductor devices like silicon carbide (SiC), gallium nitride (GaN) and insulated gate bipolar transistors (IGBT) being in high demand – given the advent of EVs,” it said.
It noted that SEMI expected to see a 0.7% QoQ increase in capex spending in 2Q24 following declines of 17% YoY in 4Q23 and 11% in 1Q24.
“Several major semiconductor players are expected to continue investing in SiC manufacturing and fabrication facilities, due to the proliferation of such semiconductor material.
“Pentamaster’s automated test and burn-in solutions for SiC- and GaN-related power modules should enable it to capitalise on this trend,” it said.
The report said that it also saw further opportunity for the Factory Automation Solutions (FAS) segment.
“This segment is set to see structural demand growth, driven by the rising need for automation across various industries and the ongoing advancements of Industry 4.0.
“As businesses strive to enhance efficiency, reduce operational costs, and improve precision, the demand for automated solutions continues to rise,” it said.
Currently, it noted that the medical industry was the main contributor to this division’s growth – which Pentamaster intends to leverage on.
The report also noted that the semiconductor sector was poised for a robust recovery in 2H24 and into FY25, with the capex cycle showing signs of revitalisation.
As per the latest World Semiconductor Trade Statistics (WSTS) forecast, it said the value of the global semiconductor market is projected to grow by 16% YoY in 2024 to USD611 billion.
“This resurgence will be driven by increasing demand for advanced technologies such as 5G, artificial intelligence (AI) and EVs – as these require sophisticated semiconductor components.
“Additionally, it stands to benefit from US-China trade tensions, by becoming a strategic alternative supplier amid export restrictions, thereby enhancing its role in the industry’s resurgence,” it said.
It added that the National Semiconductor Strategy (NSS) will drive the long-term growth of Malaysia’s semiconductor industry, benefiting companies like Pentamaster through enhanced investment and innovation. – TMR
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