MORNING CALL: 13/10/23

TA Securities is sanguine on Pantech Group’s outlook. Here’s why.

Transcript

00:00 Our stock in focus this Friday morning is Pantech Group, a one-stop centre for pipes,

00:07 valves and fittings. TA Securities keeping its buy call on the stock, with a higher target

00:13 price of RM1.18. The counter last traded at RM0.84.

00:18 Here's why TA is upbeat on Pantech. The oil and gas sector will continue to be the main

00:23 contributor to revenue, consistently making up more than 50% of top line. TA expecting

00:30 strong upstream investments in the sector on the back of resilient crude prices. Pantech

00:35 may also benefit from the increased demand for carbon capture, usage and storage, or

00:41 CCUS. This as the oil and gas sector comes under increasing pressure to decarbonise their

00:46 operations. The potential of hydrogen as an energy carrier will also increase the demand

00:52 for the production, delivery and end use of the gas in the future, and that may necessitate

00:57 new pipelines. At a dividend payout assumption of 50%, the

01:01 research house says Pantech offers an attractive dividend yield of 6.8% to 7.3% for FY24 to

01:09 FY26. The stock is also trading at an undemanding valuation of 7.1 times FY24 EPS. TA making

01:17 some housekeeping adjustments, raising its earnings forecasts by 3.4% for FY24, 4.3%

01:25 for FY25 and 5% for FY26. So what's the consensus? According to Bloomberg

01:31 data, we've got three buy calls on the stock, with target prices averaging out to RM1.18.

01:38 Pantech last closed at RM84.5, so that implies a potential return of almost 40%.

01:43 [music]