Pestech International Bhd
(March 3, RM4.80)
Maintained neutral with a higher target price (TP) of RM4.51. We make no changes to our order book replenishment assumption of RM330 million but we have made slight adjustments to forecast financial year ending June 30, 2015 (FY15F) and FY16F earnings higher by 3% to 4% after adjusting profit recognition for the aforementioned periods.
We are maintaining our “neutral” stance on Pestech International Bhd with a higher TP of RM4.51 (8% downside), pegged to a forecast calendar year 2015 (CY15F) price-earnings ratio (PER) of 17 times. The higher PER is justifiable with a low three-year average PER to growth of 0.42 times. The company had a net gearing ratio of 0.62 times as at end-December 2014.
Pestech’s wholly-owned subsidiary, Pestech Sdn Bhd, has secured a RM48.4 million job from Sarawak Energy Bhd for the Samajaya 132/33/11kV substation project in Kuching, Sarawak.
Currently, Pestech still has two ongoing projects (Mapai and Mambong projects) awarded by Sarawak Energy in October 2013 and January 2014 respectively.
We expect Pestech to potentially win more projects from Sarawak Energy as it plays a vital role in supporting the Sarawak Corridor of Renewable Energy or Score developments. — RHB Research, March 3
This article first appeared in The Edge Financial Daily, on March 4, 2015.