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August 24, 2020 11:02 am +08

KUALA LUMPUR (Aug 24): Panasonic Manufacturing (M) Bhd (Panasonic), which posted a net loss of RM2.56 million for its first quarter ended June 30, 2020 (1QFY21) after shutting operations down during the Covid-19 lockdown period, is likely to return to the black in the second quarter ended Sept 30, 2020 (2QFY21) as the easing of movement restrictions from early May has enabled its manufacturing plants to reopen and retailers to restock their shelves, said analysts.

Nonetheless, they point out that Panasonic’s earnings recovery is likely to be subdued by geopolitical tensions, economic headwinds and cautious consumer spending.

“... We expect sales to continue to be tepid for the foreseeable future. With the US calling for continued sanctions on the Middle East, we expect sales to the region to continue to be lacklustre,” said HLIB Research analyst Gan Huan Wen.

He highlighted that previously, sales to the region had dropped by 21.6% and 12.8% in FY19 and FY20 respectively.

“Furthermore, the slowing down of property launches domestically should continue to dampen sales of fans as [Panasonic] sells a large number of fans to property developers,” he added.

Gan said HLIB Research will cut its earnings forecast for Panasonic by 7.2% to factor in lower sales volumes in the financial year ended March 31, 2021 (FY21).

Accordingly, the research house will reduce Panasonic’s target price to RM28.40 from RM29.40 prior, based on an unchanged 17 times price-earnings multiple on mid-FY22 earnings, despite maintaining its ‘hold’ rating on the counter.

“Despite expected weaker earnings in FY21, we reckon [Panasonic] has the balance sheet strength to weather through this storm. As of end-June, PMM has a net cash position of RM528.9 million (or RM8.71 per share),” he explained.

Meanwhile, CGS-CIMB analyst Syazwan Aiman Sobri said while Panasonic’s earnings will recover in both the domestic and export markets as distributors and retailers replenish their inventories after over a month of disrupted supply from the movement control order (MCO), the research house is lowering its earnings per share forecast by 3.5% to 3.9% from FY21 to FY23, as it believed that recovery will be relatively subdued due to economic headwinds.

Syazwan said the research house is raising its target price to RM30.50 from RM27.90 previously, due to a higher PE of 17 times, from 15 times earlier.

“The premium is to reflect its stronger balance sheet and dividend payout ability versus its peers in the consumer discretionary sector. We think its share price will likely be supported by its attractive CY21-23F dividends yields of 6.8% considering the current low interest rate environment,” he said.

MIDF Research analyst Ng Bei Shan noted that Pansonic is expected to recover gradually in the coming quarters due to improving demand for its products.

“That said, we believe that consumer sentiment may still be fickle and some segments may see downtrading to cheaper products,” she added.

The research house has trimmed its earnings forecast by 2.3% and 1.5% for FY21 and FY22 on the poorer performance in 1QFY21. It maintained its ‘neutral’ rating on the counter with a slightly lower target price of RM29.19, down from RM29.62, based on an unchanged PE of 14 times FY22 expected EPS of 208.5 sen.

At 10.42am, Panasonic traded 54 sen or 1.71% lower at RM31, valuing the company at RM1.92 billion.

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