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Pentamaster (PENT MK): Laying the groundwork for 2026
MALAYSIA | TECHNOLOGY | UPDATE
- Recovery in medical segment and sustained momentum in the automotive segment to drive 2H25 earnings
- 2026E earnings growth will be primarily driven by medical, semiconductor, and electro-optical segments
- Reiterate HOLD rating with unchanged TP of RM3.57
Better 2H25 with recovery in various segment
2Q25 revenue was anchored by the automotive segment, with management guiding for similar momentum in 2H25, supported by steady demand from EV-related customers. The medical segment rebounded from a soft 1Q25, underpinned by order book of RM175m, providing earnings visibility until end25. Combined, both segments are projected to account for 55-60% of 2025 total revenue. Contributions from consumer/industrial, semiconductor and electro-optical segments are expected to remain stable, while the renewable energy segment is guided to deliver more meaningful contribution from 2026E onwards. The group’s total order book remained steady QoQ at RM350m, with management expecting it to recover to RM400m by end25. To achieve its internal RM1bn group revenue target, management estimates that it would need to sustain an order book of RM550m.
Eyeing 2026
Management remains upbeat on the group’s growth prospects, with the medical and semiconductor segments expected to be key drivers in 2026E. The recertification for its glucose monitoring device, following relocation of operations to Campus 3, is nearing completion, with commercialization targeted for 2026. Meanwhile, its newly incorporated medical subsidiary, Mirak Medica, is set to collaborate with local entrepreneurs to engage the Ministry of Health and public hospitals on developing localized medical solutions, with initial contributions expected from 2026E onwards. Pentamaster onboarded 2 new renewable energy customers: 1) a US-based customer involved in battery technology for automotive industry, and 2) a customer focused on solar photovoltaic systems. Management expects contributions from the renewable energy segment to accelerate in 2026.
Maintain HOLD and TP at RM3.57
We expect an improving 2H25 outlook on the back of stable automotive contributions and medical segment recovery gaining pace. We reiterate our HOLD rating and TP of RM3.57 based on an 28x target PE multiple on 2026E EPS. Key downside risks include sharp appreciation of RM versus US$, better/lower-than-expected margins, and customer orders.
Key Financials
| Y/E Dec | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Revenue (RMm) | 691.9 | 623.0 | 672.9 | 699.8 | 727.8 |
| EBITDA (RMm) | 139.8 | 129.2 | 122.9 | 145.7 | 152.5 |
| Pretax profit (RMm) | 128.5 | 105.4 | 109.2 | 129.5 | 142.5 |
| Net profit (RMm) | 76.2 | 65.2 | 76.0 | 90.7 | 102.0 |
| EPS (sen) | 10.7 | 9.2 | 10.7 | 12.7 | 14.3 |
| PER (x) | 35.8 | 41.8 | 35.8 | 30.0 | 26.7 |
| Core net profit (RMm) | 86.8 | 79.7 | 76.0 | 90.7 | 102.0 |
| Core EPS (sen) | 12.2 | 11.2 | 10.7 | 12.7 | 14.3 |
| Core EPS growth (%) | 18.0 | -8.2 | -4.7 | 19.3 | 12.5 |
| Core PER (x) | 31.4 | 34.2 | 35.8 | 30.0 | 26.7 |
| Net DPS (sen) | 2.0 | 2.0 | 2.0 | 3.0 | 3.0 |
| Dividend Yield (%) | 0.5 | 0.5 | 0.5 | 0.8 | 0.8 |
| EV/EBITDA (x) | 18.2 | 20.2 | 21.4 | 18.0 | 17.0 |
| Chg in EPS (%) | – | – | – | – | – |
| Phillip/Consensus (%) | – | – | 1.02 | 1.01 | 0.98 |
Climbing up the value chain
In the semiconductor segment, Pentamaster has 8 new products under R&D, with 1 of the new wafer AOI systems completed proof of concept (PoC) and will be delivered for customers trials. The remaining products are on track to complete PoC by end25. Key focus areas include HPC burn-in test systems, advance packing inspection solutions, and silicon photonic/CPO test system, positioning the group to move further up the value chain from 2H26 onwards. The electro-optical segment is also expected to benefit from product refresh cycles at a major customer, with the adoption of more advanced optical sensors lifting 2026E earnings contribution.
Table 1: Quarterly revenue breakdown by segment (%)
| Segment | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 2Q24 | 3Q24 | 4Q24 | 1Q25 | 2Q25 |
|---|---|---|---|---|---|---|---|---|---|
| Automotive | 41% | 34% | 26% | 29% | 32% | 33% | 29% | 25% | 30% |
| Medical | 35% | 29% | 46% | 45% | 33% | 25% | 30% | 20% | 35% |
| Semiconductor | 9% | 10% | 5% | 8% | 11% | 15% | 12% | 15% | 12% |
| Consumer and Industrial | 13% | 11% | 9% | 17% | 14% | 11% | 9% | 20% | 23% |
| Electro-optical | 1% | 5% | 8% | 1% | 9% | 16% | 20% | 20% | – |
Table 2: Quarterly breakdown by FAS/ATE (%)
| Segment | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 2Q24 | 3Q24 | 4Q24 | 1Q25 | 2Q25 |
|---|---|---|---|---|---|---|---|---|---|
| FAS | 55% | 56% | 59% | 41% | 39% | 28% | 29% | 27% | 42% |
| ATE | 45% | 44% | 41% | 59% | 61% | 72% | 71% | 73% | 58% |
Table 3: Pentamaster’s 3-year PE (x)
| Metric | Value |
|---|---|
| Average | 37.3x |
| +2 Standard Deviation | 50.4x |
| +1 Standard Deviation | 43.9x |
| -1 Standard Deviation | 30.8x |
| -2 Standard Deviation | 24.3x |
FINANCIALS
| Income Statement (Y/E Dec, RMm) | |||||
|---|---|---|---|---|---|
| 2023 | 2024 | 2025E | 2026E | 2027E | |
| Revenue | 692 | 623 | 673 | 700 | 728 |
| Operating expenses | (552) | (494) | (550) | (554) | (575) |
| EBITDA | 140 | 129 | 123 | 146 | 152 |
| Depreciation | (14) | (22) | (26) | (29) | (31) |
| EBIT | 126 | 108 | 97 | 117 | 121 |
| Net int income/(expense) | 13 | 13 | 13 | 14 | 23 |
| Exceptional gains / (losses) | (11) | (14) | 0 | 0 | 0 |
| Associates’ contribution | 0 | (1) | (1) | (1) | (1) |
| Pretax profit | 128 | 105 | 109 | 130 | 143 |
| Tax | (1) | (2) | (1) | (1) | (1) |
| Minority interest | (51) | (39) | (32) | (38) | (39) |
| Net profit | 76 | 65 | 76 | 91 | 102 |
| Core net profit | 87 | 80 | 76 | 91 | 102 |
| Balance Sheet (Y/E Dec, RMm) | |||||
|---|---|---|---|---|---|
| 2023 | 2024 | 2025E | 2026E | 2027E | |
| Fixed assets | 282 | 457 | 521 | 574 | 631 |
| Other long term assets | 108 | 91 | 89 | 90 | 92 |
| Total non-current assets | 390 | 548 | 611 | 664 | 723 |
| Cash and equivalents | 491 | 449 | 456 | 502 | 569 |
| Stocks | 191 | 122 | 136 | 138 | 144 |
| Debtors | 196 | 168 | 184 | 192 | 199 |
| Other current assets | 50 | 65 | 62 | 65 | 67 |
| Total current assets | 928 | 803 | 839 | 896 | 979 |
| Creditors | 118 | 129 | 123 | 110 | 115 |
| Short term borrowings | 0 | 0 | 0 | 0 | 0 |
| Other current liabilities | 185 | 128 | 139 | 138 | 143 |
| Total current liabilities | 303 | 257 | 262 | 248 | 258 |
| Long term borrowings | 0 | 0 | 0 | 0 | 0 |
| Other long term liabilities | 9 | 13 | 13 | 17 | 18 |
| Total long term liab. | 9 | 13 | 13 | 17 | 18 |
| Shareholders’ Funds | 699 | 748 | 810 | 892 | 984 |
| Minority Interest | 306 | 333 | 365 | 402 | 441 |
| Cash Flow Statement (Y/E Dec, RMm) | |||||
|---|---|---|---|---|---|
| 2023 | 2024 | 2025E | 2026E | 2027E | |
| Pretax Profit | 101 | 120 | 109 | 130 | 143 |
| Depreciation & amortisation | 20 | 22 | 26 | 28 | 30 |
| Working capital changes | 149 | 10 | (21) | (21) | (8) |
| Cash tax paid | (1) | (2) | (1) | (1) | (1) |
| Others | (4) | (11) | (6) | 1 | 1 |
| C/F from operation | 265 | 138 | 108 | 136 | 164 |
| Capex | (40) | (180) | (75) | (54) | (60) |
| Others | (7) | 35 | (6) | (2) | (2) |
| C/F from investing | (46) | (146) | (81) | (56) | (61) |
| Debt raised/(repaid) | 0 | 0 | 0 | 0 | 0 |
| Dividends paid | (14) | (14) | (14) | (8) | (10) |
| Others | (7) | (18) | (4) | (27) | (26) |
| C/F from financing | (21) | (33) | (18) | (35) | (36) |
| Net change in cash flow | 197 | (40) | 9 | 45 | 67 |
| Free Cash Flow | 225 | (42) | 33 | 82 | 104 |
| Financial Ratios and Margins (Y/E Dec) | |||||
|---|---|---|---|---|---|
| 2023 | 2024 | 2025E | 2026E | 2027E | |
| Revenue (%) | 15.2 | (10.0) | 8.0 | 4.0 | 4.0 |
| EBITDA (%) | 9.2 | (7.6) | (4.9) | 18.5 | 4.7 |
| Core net profit (%) | 18.0 | (8.2) | (4.7) | 19.3 | 12.5 |
| EBITDA margin (%) | 20.2 | 20.7 | 18.3 | 20.8 | 21.0 |
| PBT margin (%) | 18.6 | 16.9 | 16.2 | 18.5 | 19.6 |
| Core net profit margin (%) | 12.5 | 12.8 | 11.3 | 13.0 | 14.0 |
| Effective tax rate (%) | 0.7 | 1.4 | 1.3 | 1.0 | 1.0 |
| ROA (%) | 6.2 | 4.9 | 5.4 | 6.0 | 6.3 |
| ROE (%) | 11.5 | 9.0 | 9.8 | 10.7 | 10.9 |
| ROCE (%) | 19.0 | 14.9 | 12.4 | 13.7 | 12.9 |
| Dividend payout ratio (%) | 18.6 | 11.0 | 11.0 | 11.0 | 11.0 |
| Current ratio (x) | 3.1 | 3.1 | 3.2 | 3.6 | 3.8 |
| Op. cash flow (RMm) | 265 | 138 | 108 | 136 | 164 |
| Free cashflow (RMm) | 225 | (42) | 33 | 82 | 104 |
| FCF/share (sen) | 32 | (6) | 5 | 11 | 15 |
| Debtors turnover (days) | 104 | 98 | 100 | 100 | 100 |
| Stock turnover (days) | 126 | 90 | 91 | 91 | 91 |
| Creditors turnover (days) | 78 | 95 | 81 | 73 | 73 |
| Cash Conversion Cycle (days) | 152 | 93 | 109 | 118 | 118 |
| Net gearing (%) | -70% | -60% | -56% | -56% | -58% |
| Interest cover (x) | 0.1 | 0.1 | 0.1 | 0.1 | 0.2 |
| Quarterly Profit & Loss (Y/E Dec, RMm) | |||||
|---|---|---|---|---|---|
| 2Q24 | 3Q24 | 4Q24 | 1Q25 | 2Q25 | |
| Revenue | 171 | 150 | 131 | 132 | 145 |
| Operating expenses | (133) | (114) | (104) | (104) | (113) |
| EBITDA | 38 | 36 | 27 | 27 | 32 |
| Depreciation | (5) | (5) | (6) | (7) | (7) |
| EBIT | 33 | 31 | 21 | 21 | 25 |
| Net int income/(expense) | 3 | 3 | 4 | 2 | 2 |
| Associates’ contribution | (0) | (0) | (0) | (1) | (0) |
| Exceptional items | (3) | (13) | (3) | (1) | (8) |
| Pretax profit | 32 | 21 | 21 | 21 | 18 |
| Tax | (0) | (0) | (0) | (0) | (0) |
| Minority interest | (12) | (9) | (7) | (7) | (6) |
| Net profit | 20 | 12 | 14 | 13 | 12 |
| Core net profit | 23 | 25 | 17 | 14 | 20 |
| Margins (%) | |||||
| EBITDA | 22.3 | 24.2 | 20.4 | 20.8 | 21.9 |
| PBT | 18.7 | 14.2 | 16.2 | 15.6 | 12.2 |
| Core net profit | 13.6 | 16.3 | 13.1 | 10.6 | 13.8 |
Contact Information
SINGAPORE
Phillip Securities Pte Ltd
250, North Bridge Road #06-00
Raffles City Tower
Singapore 179101
Tel: +65 6533 6001
MALAYSIA
Phillip Capital Sdn Bhd
B-18-6 Block B Level 18 Unit 6 Megan Avenue II,
No.12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel: +603 2783 0300
HONG KONG
Phillip Securities (HK) Ltd
11/F United Centre 95 Queensway
Hong Kong
Tel: +852 2277 6600
JAPAN
Phillip Securities Japan, Ltd.
4-2 Nihonbashi Kabuto-cho Chuo-ku,
Tokyo 103-0026
Tel: +81-3 3666 2101
INDONESIA
PT Phillip Securities Indonesia
ANZ Tower Level 23B,
Jl Jend Sudirman Kav 33A
Jakarta 10220 – Indonesia
Tel: +62-21 5790 0800
CHINA
Phillip Financial Advisory (Shanghai) Co Ltd
No 550 Yan An East Road,
Ocean Tower Unit 2318,
Postal code 200001
Tel: +86-21 5169 9200
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Equity:
- BUY: Total stock return expected to exceed +10% over 12-month period
- HOLD: Total stock return to be between -10% and +10% over a 12-month period
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