Pantech: How RAPID Can It Grow?

Pantech FY15Q1 Financial Result

PANTECH	FY15Q1	FY14Q4	FY14Q3	FY14Q2	FY14Q1
Revenue	130.7	127.8	131.1	153.8	162.2
PBT	18.1	19.1	16.3	21.9	18.5
PBT%	13.8	14.9	12.4	14.2	11.4
PAT	13.6	14.6	12.1	15.3	13.8
Manu Rev	55.4	49.9	56.0	76.8	82.5
Manu PBT	10.7	9.3	10.1	13.0	12.2
Trade Rev	75.3	77.9	75.1	77.0	79.8
Trade PBT	8.5	9.8	7.0	9.9	7.7
Total Equity	444.3	430.0	417.7	411.4	393.2
Total Assets	701.5	687.6	698.8	722.2	687.6
Trade Receivables	136.9	128.7	120.8	128.5	125.1
Inventories	253.6	252.3	235.7	245.1	246.9
Cash	66.3	59.9	99.7	97.6	78.3
Total Liabilities	257.2	257.5	281.1	310.7	294.4
Trade Payables	49.3	44.8	36.9	56.3	46.2
ST Borrowings	132.5	130.6	144.2	148.9	151.0
LT Borrowings	62.3	63.1	78.8	75.1	79.1
Net Cash Flow	2.1	-27.5	15.5	13.9	0.5
Operation	6.1	65.9	41.2	29.5	4.6
Investment	-2.6	-33.4	-24.3	-16.7	-5.8
Financing	-1.4	-59.9	-1.3	1.2	1.7
EPS	2.39	2.68	2.24	2.91	2.70
NAS	0.78	0.76	0.74	0.73	0.77
Net D/E Ratio	0.29	0.31	0.30	0.31	0.39

Pantech achieves an "average" result for its FY15Q1. Both revenue and net profit drop YoY but PBT margin is still good at 13.8% thanks to high margin from newly acquired Nautic Steel.

Its trading division is still struggling to crawl back to its previous revenue high of RM100mil a quarter in FY13, while manufacturing division also shows sign of slowing down.

All these are because of lower sales due to lower demand from the Oil & Gas sector.

Most analysts give Pantech a target net profit of RM60mil in FY15.

Balance sheet & cash flow remain healthy. A first single tier interim dividend of 1.0sen was declared. 

Nevertheless, Pantech investors' eyes will be on the RM90bil RAPID project which has just been given green light 3 months ago.

It is estimated that 15% of the RM90bil (RM13.5bil) is likely to be allocated to pipes, valves & fittings (PVF). 

Pantech is said to be the only one-stop PVF supplier in Malaysia and has a market share of as much as 40%. Its major competitors come from Singaporean firms.

If Pantech can get only 20% share of the PVF supply contracts from RAPID contractors (though it has 40% market share), then it could be RM2.7bil over 6 years or RM450mil revenue a year. With 10% net margin, this could be RM45mil additional yearly net profit for Pantech.

Anyway, all these are just rough estimates only.

Even without new projects like RAPID, Pantech said that it can generate recurring income from replacement market which makes up 40% of its sales every year.

Pantech has clients in 59 countries with almost 50% of its products are exported. Its sales to Brazil has tripled since the acquisition of Nautic Steel and expect more to come from this country. 

It also plans to double the production capacity of Nautic Steel to 1,000 MT/annum by FY16.

The contracts award for RAPID is expected to flow from second half of CY2014 onward. Can we hear the good news from Pantech soon?