PENTA: Strategic Growth and Expanding Orderbook Signal Positive Future
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Introduction
A recent investment bank assessment highlights a positive outlook for the company, driven by robust orderbook expansion and strategic investments in next-generation technologies. Despite recent declines in financial performance, the firm’s proactive measures and promising market trends underpin a “BUY” recommendation, signaling confidence in its long-term growth trajectory.
Performance Review
The company’s 9M25 financial results showed a decline in revenue and core profit after tax and minority interests, with revenue falling 13.8% and PATAMI by 33.8% year-on-year. This performance was primarily attributed to slower billing in the automated test equipment (ATE) segment, stemming from timing delays in automotive and electro-optical deliveries. Gross profit margins (GPM) were also impacted, averaging approximately 26% for 9M25, a decrease from previous periods, due to higher fixed costs associated with the relocation of its factory automation solutions (FAS) division to a new, larger facility.
Strategic Expansion and Orderbook Strength
Looking ahead, the company’s outstanding orderbook value has significantly improved, reaching MYR450m. This provides a strong foundation for future revenue, with potential upside in the fourth quarter of 2025 anticipated from new project wins, particularly in the automotive and medical sectors. The FAS division continues to be a major contributor to the orderbook, supported by key customers in medical technology and data centre automation solutions. Demand momentum remains firm, driven by growth in the data centre (15-20%) and smartphone (~25%) segments, while the automotive segment shows stability. Margins are anticipated to stabilize as new product lines reach mass production levels, contributing to improved profitability.
Innovation Driving Future Growth
The recovery of the ATE segment is projected to be sustained, buoyed by improving momentum in the semiconductor industry and smartphone-related clients, particularly in the logic, power, and electro-optical segments. The company plans to invest MYR50-80m in research and development over the next 24 months for its ambitious “9 Samurai” projects initiative. These initiatives are strategically focused on high-value areas such as advanced packaging, wafer probing, 3D X-ray metrology, chiplet sorting, and artificial intelligence (AI)-driven automation. These advanced solutions are designed to offer significantly higher average selling prices (2.5-3x) compared to existing offerings. Management anticipates generating approximately MYR100m in turnover from these initiatives in FY27, with further increases expected in FY28.
Investment Outlook
Given the company’s solid and expanding orderbook, strategic pivot towards higher-value technology roadmaps, and anticipated sustained recovery in key market segments, the investment bank reiterates a positive stance. This forward-looking view, coupled with robust growth prospects and strategic innovation, underpins a target price of RM0.25, representing a substantial 25.0% upside from its last traded price of RM0.20, warranting a BUY recommendation.
