Stocks: Malaysia: Pantech

 Found this on the Edge: Looks interesting if it is legit. Need to investigate a little more.

Pantech Group Holdings (RM1.87) offers investors a relatively cheap exposure to the booming oil & gas as well as palm oil industries.

The company is one of the largest one-stop distributors of pipes, fittings and flow controls (PFF) products in the region. That is, Pantech provides its customers a complete solution for the transmission of fluids and gases from point A to point B.

Double-digit growth over foreseeable future
Pantech is expected to grow at a rapid clip, bolstered by increased activities in the buoyant oil & gas and palm oil sectors.

The company’s sales expanded at a compounded growth rate of nearly 66% annually in the past three years, from RM53.5 million in FYFeb04 to RM243 million in FY07. Sales are on track to hit RM310.7 million for FYFeb08, or equivalent to about 28% year-on-year (y-o-y) growth.

Similarly, earnings have also expanded by leaps and bounds over the same period. Net profit rose from just RM2.3 million in FY04 to RM26.8 million in FY07. We estimate earnings to grow by 27% to RM33.9 million in FY08. Looking further ahead, net profit is expected to grow by another 18% and 23% in FY09-FY10, respectively.

On the other hand, Pantech’s shares are still trading at very attractive valuations — relative to the company’s projected double-digit growth rates. The stock is priced at only 7.2 and 5.9 times our annualised 2008-2009 estimated earnings, respectively.

From humble beginnings…
Pantech has its humble beginnings as a trading company catering to the domestic market back in 1988. The company successfully capitalised on the growing market for high pressure, seamless and specialised steel pipes, fittings, flanges, valves and other related products — right at the time when Malaysia’s petrochemical and oil & gas industries were taking off.

Its customer list soon grew to include major players such as Gas Malaysia, Malaysia Marine and Heavy Engineering (a subsidiary of MISC), Kencana HL, Petronas Carigali, Sime Engineering, KL Kepong and Mewah Oils.

In 2000, Pantech expanded into the manufacturing of butt-welded carbon steel fittings such as elbows, tees, reducers, end-caps and high frequency induction long bends. Since then, the manufacturing arm has grown from strength to strength, and now accounts for over one-fifth of total sales.

… to one of the largest PFF distributors in the region
Today, over 80% of Pantech’s manufactured products are exported to countries all over the world, including the US, Mexico, Iran, Singapore, India and Brunei.

The company’s products are highly specialised — its PFF products are mainly used in high pressure, corrosive or extreme temperature conditions across a broad swath of industries.

The oil & gas sector is its biggest customer, accounting for some 53% of total sales, while palm oil and refineries contribute to about 15% of sales.

Both sectors are expected to growth at a rapid pace with activities spurred by prevailing high crude oil and crude palm oil prices.

Pantech has warehouses and storage yards located at key industrial hubs in Malaysia — in Pasir Gudang, Shah Alam, Kuantan and the Free Trade Zone in West Port — and Singapore.

The company has also recently opened a sales office in Vietnam, to capitalise on the country’s fast-growing oil & gas sector. Total storage space has more than doubled to over 78,000 square metres currently, from just 29,341 square metres two years back.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.