Pentamaster Bhd ("Penta") is involved in production of automated equipment & provision of automated manufacturing solution. Its areas of expertise include semiconductor, vision inspection, IT, LED test solution, material handling & packaging solution.
The group has worked fora few years in developing the Glove Unique Reprocessing Unit ("GURU") which allows rubber gloves to be reused up to 7 times. This game-changing product has not caught on in a big way. If it succeeds in penetrating the healthcare sector, its revenue & earning could increase significantly.
Recent Financial Results
For the past 10 quarters, Penta's financial performance has slowly improved albeit with some volatility. The latter is probably due to the nature of its business which is likely to be project-based.
Chart 1: Penta's last 10 quarterly results
When you look at Penta's financial performance over a 10-year period, you will see a drop in revenue and a period of losses in FY2008-2010. This was due to business slowdown that accompanied the global financial crisis of 2008.
Chart 2: Penta's last 10 annual results
In 2010, Penta carried out a strategic move to dispose off 2 factories and certain machineries for RM50 million in order to reduce its gearing as well as to re-focus its business on its core technological areas.
Chart 3: Penta's Shareholder's Fund, Gearing & Total Assets for last 10 annual results
This strategic move helped to push up its profit margin as well as elevating its assets turnover over the past 3 years. With lowered gearing (the opposite of T.Assets/T.Equity), the group is poised to expand its Balance Sheet when the business volume comes in. Alas, business volume has been tepid at best.
Chart 4: Penta's Profit Margin, Assets Turnover & T.Assets to T. Equity for last 10 annual results
Financial Position
As at 31/3/2015, Penta's financial position is deemed satisfactory with current ratio at 2.2 times and gearing ratio at 0.3 time.
Valuation
Penta (traded at RM0.77 as at 12.00pm) commands a trailing PE of 13.8 times. At this PER, Penta is deemed fully valued.
Technical Outlook
Penta has just broken above its symmetrical triangle at RM0.72 (see Chart 4). Its immediate target is RM0.80. This breakout also coincides with the breakout of a 5-year sauce formation. It may potentially g as high as RM1.20.
Chart 1:Penta's daily chart as at Jun 19, 2015 (Source: ShareInvestor)
Chart 2: Penta's monthly chart as at Jun 19, 2015 (Source: ShareInvestor)
Conclusion
Based on technical consideration, Penta could be a good stock for a trading BUY. Its unexciting financial performance and full valuation would rule out the stock for long-term investment for now.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Penta.
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