RHB: Petronas capex to drive Pantech trading income

by **Cals** Thu 25 Jul 2013, 12:09

RHB: Petronas capex to drive Pantech trading income
Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Thursday, 25 July 2013 12:03

KUALA LUMPUR (July 25): RHB Research expects PANTECH GROUP HOLDINGS BHD []’s trading income to pick up in the near term.

This is in anticipation that the steel-products manufacturer will clinch contracts from national oil firm Petroliam Nasional Bhd (Petronas).

“Sales in its (Pantech) trading division may pick up eventually in the near-term, as we are still bullish on the local O&G (oil and gas) sector, which is being driven by Petronas’ aggressive capital expenditure, RHB analyst Jerry Lee wrote in a note today,

The note follows the annoucement of Pantech's financial results yesterday. RHB said Pantech's first quarter earnings were within the research firm's and street expectations.

Lee said Pantech's net profit of RM13.8 million for the first quarter ended May 31, 2013 (1QFY14) “was largely in line with our estimates”.

This is 10.4% higher than the previous corresponding quarter’s RM12.5 million.

“Revenue from its trading division (down 12% year-on-year) was affected by slower project execution in the O&G sector, which we believe was due to pre-general election uncertainties. Additionally, increased operating expenses and a product mix change also narrowed down this segment’s profit margins,” Lee said.

Pantech’s manufacturing division, however, reported a 50% year-on-year increase in revenue to RM82.5 million, while its segmental profit was 160% higher to RM12.2 million.

“All-in-all, its overall performance was in line with what we expected, with all its business arms contributing positively and the group charting a positive growth," Lee said.

Lee has maintained RHB's "buy" call for Pantech shares with an unchanged target price of RM1.43. At 11:10am, Pantech inched down two sen or 1.8% to RM1.09 with a trade volume of 4.99 million.

“We continue to like Pantech for its solid business foundation and bright prospects,” he said.