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Wednesday, January 23, 2013

Pantech - Good Start For 2013 (OSK)

Fair Value : MYR 1.00 
Pantech’s 9MFY13 results beat  consensus  but were  in  line with our estimates.  The good showing was due mainly to strong demand from the O&G sector and a bigger contribution  from  Nautic  Steel.  We  expect  more  earnings  upside  from  Nautic  Steel and  Pantech’s stainless  steel  division.  The  board  has  proposed  an  interim  single-tier  dividend  of  1.2  sen,  which  is  in  line  with  our expectation.  The  recent  market correction  opens  a  window  of  opportunity  for  investors  to  accumulate  this  stock. Maintain BUY, with FV unchanged at RM1.00.

Solid as usual. Pantech recorded a commendable 3QFY13 net profit of RM15.6m (+9.1% q-o-q,  +51.2%  y-o-y),  which  is  well  within  our  expectations.  The company’s 9MFY13 cumulative earnings improved by 77.9%, mainly due to its investment in UK-based Nautic Steel bearing fruit. By segment, the 9MFY13 profit before tax (PBT) at its trading division improved by 55% y-o-y, buoyed by higher sales from the oil and gas (O&G) sector as well as  a  wider  profit  margin  due  to  better  cost  control.  Meanwhile,  PBT  at  its  manufacturing arm  soared  221%,  again  mainly  boosted  by  Nautic  Steel’s  contribution,  as  well  as  an improved product mix at its carbon steels manufacturing division.

Future  still  looking  bright.  As we highlighted in our previous report, “Brighter Prospects For 2013”, Pantech may continue to ride on the O&G boom with Nautic Steel continuing to contribute the bulk of profits while its trading division leverages on the latter’s brand name to expand the group’s business. As we expect its stainless steel division to potentially start contributing positively to its bottomline in the next financial year, we may see more upside in the company’s earnings.
Reiterate BUY, RM1.00 FV stays. We continue to like Pantech’s exposure in the booming O&G sector. We keep our BUY recommendation and FV unchanged at RM1.00, based on 9x  FY14f  EPS.  We  think  that  the  recent  correction  in  the  share  price  presents  an opportunity for investors to accumulate the stock.

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