Below is extract from local news report on Penta International Q1 Financial Report:
Pentamaster (01665) 1Q net up 43% to MYR30.27m
[ET Net News Agency, 15 May 2019] Pentamaster International Limited (01665) said its profit was MYR30.27 million for the three months ended 31 March 2019, a year-on-year increase of 42.73%. The earnings per share were MYR1.89 cent.
The revenue was MYR116.67 million, a year-on-year increase of 18.99%. The gross profit was MYR41.13 million, a year-on-year increase of 39.26%.
Use link below to download the full Q1 2019 announcement from HKSE:
Please note that Penta announcement to HKSE is in MYR. Need to apply exchange rate to convert to HKD.
What is the reasonable target value for Penta International Limited? FY2018 EPS is HKD 12 cent. Consensus estimated FY2019 EPS is HKD 16 cent. Q1 2019 actual EPS is HKD 3.6 cents.
The parent, Pentamaster Corp Berhad is traded in BSKL at 23X PER. Since 99.9% of the parent company profit come from Pentamaster International Limited, not unreasonable to apply the same PER of 23X. HKD 16 cents multiply by 23, equal to HKD 3.68. That imply 244% upside from current price of HKD 1.07.
How about the competitor that are in similar business service the electronic manufacturers? In Malaysia, the closet twin will be Vitrox. Vitrox is valued at 30X PER. Holy cow! May be Malaysia market is crazy, let’s look at Greater China Markets. The closest twin is Suzhou HYC that just seen it’s IPO oversubscribed by 336 times. It is valued at 41X PER! May be Malaysia Market is not so crazy after all.
For me, I will not become fixated on any PER or target price. This is a fast growing company with nett cash, high ROE and generate lots of free cash flow (ie self-financing growth). More practical method is to monitor the progress of their VCSEL, medical sector business and price chart.
By the way, Penta International do pay dividend. The pay out ratio is low for FY2018. Coupled with growing free cash flow, I am looking forward for many years of growing dividends. For a growth company, growing dividend is more important than high dividend. Rising dividend with act as tail wind to propel the share price upward.