For QE31/5/2016, Pantech's net profit increased by 9% q-o-q but dropped 11% y-o-y to RM8.1 million while its revenue increased by 14% q-o-q but dropped 11% y-o-y to RM124 million. Revenue & net profit improved q-o-q due to better contribution from trading division. The weaker y-o-y performance was mainly due to the increase in operating expenses and competitive pricing from trading division (arising from weaker demand from oil and gas sector). [Note: The latest quarterly results was announced on July 21.]
Table: Pantech's last 8 quarterly results
Chart 1: Pantech's last 37 quarterly results
Pantech's financial position is deemed satisfactory. As at 31/5/2016, its current ratio stood at 3.3 times while its gearing ratio stood at an elevated 0.4 time. While current ratio is satisfactory, its inventory level appears high with inventory turnover of 180 days. Debtors' turnover is probably within industry's standard at 90 days. ROE has dropped from about 13% in FY14 to 7% today.
Pantech (closed at RM0.535 last Friday) is now trading at a PE of 8.8 times (based on last 4 quarters' EPS of 6.08 sen). Dividend yield is at 3.9%. At these multiples, Pantech is deemed reasonably priced.
Pantech is struggling to stay at the horizontal line at RM0.55 in the past 3-4 weeks. Last Friday, it closed below this level. If it fails to rebound above it, it may continue to slide to its recent low of RM0.45.
Chart 2: Pantech's weekly chart as at Sep 30, 2016 (Source: Shareinvestor.com)
The monthly chart shows the stock be hoovering at its long-term uptrend line, SS at RM0.54. This - plus the horizontal line support note earlier - may explain why the stock can stay at the RM0.55 for the past few months.
Chart 3: Pantech's monthly chart as at Sep 30, 2016 (Source: Shareinvestor.com)
Despite weaker financial performance, Pantech can be a good stock for long-term investing based on reasonable valuation and healthy financial position.If its share price can stay above the RM0.54-0.55, it may begin to recover if its financial performance improves.
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