Pentamaster (01665.HK) is currently experiencing a delayed recovery due to macroeconomic challenges. Despite a steady contribution from its primary medical customer, the group's overall performance in the first half of 2024 (2024 1H) was underwhelming, with revenue remaining flat compared to the previous year at MYR 342.1 million. The Advanced Test Equipment (ATE) segment saw a YoY drop of 45.1%, which was offset by a 1.4x growth in the Foundry Assembly Services (FAS) segment. However, the gross margin took a hit due to increased R&D expenses and reduced economies of scale in the ATE segment.
The medical segment maintained a stable contribution, with the largest customer providing a MYR 155.5 million in revenue. While the forecast was revised downward, the investment schedule and order visibility from this key customer remained unchanged, suggesting a reasonable outlook for the medical segment. The company aims to diversify its offerings by delivering prototype equipment to new medical technology customers and small quantities of single-use medical devices. The expectation is for more orders from various customers and an increased contribution from single-use medical devices in fiscal year 2025.
Other segments have shown varying degrees of resilience. The electro-optical segment benefited from robust sales of testing equipment for ambient light sensors and proximity sensors, leading to a YoY increase of 26.2%. However, the semiconductor and automotive segments experienced YoY declines of 63.2% and 51.8%, respectively, in the second quarter, impacting the group's overall performance negatively. The semiconductor segment is expected to remain stable due to industry caution, while the automotive sector's recovery might be slower than anticipated. The possibility of clearer trade barriers in Europe and the US could improve the order book, potentially contributing to the group's performance in fiscal year 2025.
The company's performance in the second quarter (Q2) was slightly lower than expected, leading to a downward revision of forecasts for fiscal year 2024 and a reduction in the target price to HK$ 0.95 per share. Nevertheless, the long-term forecast remains intact, as the recovery is seen as delayed rather than lost. The introduction of new potential drivers such as KGD testers and single-use medical devices in fiscal year 2025 supports the "Buy" rating for Pentamaster (01665.HK).
The research report emphasizes that West Bull Securities, the firm conducting the analysis, does not receive or anticipate receiving direct or indirect compensation for expressing specific recommendations or views in the report. The report is intended for informational purposes only and does not constitute an offer to buy or sell securities.
