Penta: Earnings Remained Strong

Results Update

For QE30/9/2018, Penta's PBT increased by 23% q-o-q or 120% y-o-y to RM17 million while revenue rose 6% q-o-q or 30% y-o-y to RM108 million. Revenue rose q-o-q  due to increase in sales from automated manufacturing solution operating segment. The Group recorded a higher profit before taxation of RM29 million in the current quarter as compared to the profit before taxation of RM24 million in the preceding quarter, representing an increase of 18.4% which was in tandem with the increase in revenue.


Table: Penta's last 8 quarterly results

 
Graph: Penta's last 23 quarterly results 

Financial Position

Penta's financial position is satisfactory, with current ratio at 2.9 times and gearing ratio at 0.4 time.

Valuation

Penta (closed at RM3.25 yesterday) is now trading at a PER of 21 times (based on last 4 quarters' EPS of 15.35 sen). Based on an earning CAGR of 60% over the past 3 years, PENTA's PEG ratio is at 0.4 time. At this PEG ratio, Penta is deemed an attractive growth stock.

Technical Outlook

Last 4 weeks, Penta dropped below its uptrend line, SS at RM2.95 momentarily before recovering back up above RM3.00. Due to the sharp decline over the past 4 weeks, the stock's MACD has gone below the zero line, indicating possible downtrend. Since it has reclaimed its uptrend line, a bearish call is delayed.

Chart 1: Penta's daily chart as at Nov 1, 2018 (Source: Malaysiastock.biz)

Chart 2: Penta's weekly chart as at Nov 1, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & financial position and attractive valuation, Penta is a good stock for long term investment. The mild weakness in its technical outlook will likely be worked out in the next few weeks, and thereafter the stock may continue with its prior uptrend.

Note: 

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.