KUALA LUMPUR (Dec 5): AllianceDBS Research has maintained its “Buy” rating on Pantech Group Holdings Bhd at 78 sen with a lower target price of RM1.10 (from RM1.55) and said offshore O&G activities in Malaysia were slowing down due to sustained weak crude oil prices and lower capex, suggesting Pantech would also see slower orders from Malaysian fabricators.

In a note Friday, the research house said Pantech was a long term supplier of pipes, valves and fittings (PVF) to Malaysian fabricators like MMHE and SapuraKencana.

Therefore, it said once the fabricators exhaust their orderbooks, Pantech’s trading business would be affected.

AllianceDBS Research despite slowing offshore demand, we continue to expect the group to record healthy earnings growth in FY16-FY17.

It said demand from the downstream petrochemical development (RAPID) in Pengerang should more than offset sluggish offshore demand.

The research house said Pantech was already seeing demand trickling through from RAPID; they recently secured orders to supply induction long bends to the main pipeline currently being laid.

“We expect demand to surge from 2H16, when construction activities start in Pengerang

“We cut TP to RM1.10 (10x FY15F PE) from RM1.55 previously, after trimming earnings and reflecting the sector PE de-rating.

“We downgraded target valuation to 10x, on par with the small cap trough valuation, from 13x previously.

“However, the stock remains a Buy on the back of healthy earnings driven by RAPID and attractive 7% dividend yield (FY16F EPS). The group does not have a formal dividend policy but has consistently paid out >40% of profits since listing in 2007,” it said.