Stocks to watch: Spring Art, Sapura Energy, Pentamaster, Barakah

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KUALA LUMPUR (Nov 8): Record closes on Wall Street, given the mounting optimism that the US-China trade tension will ease soon, as the two countries have reached an agreement on removing tariffs that have been imposed in phases. Should things pan out as expected, this will augur well for the global economic outlook.

Despite that, the FBM KLCI opened on a soft note at 1,607.09, marginally lower on a rainy morning. The benchmark index, however, is still about six points above 1,600-level currently. 

Spring Art Bhd, which made its debut on the ACE Market today, topped the volume list when trading started, but it later gave way to Sapura Energy Bhd. Some 80.11 million Spring Art shares have been traded as at 10.30am. It opened at its initial public offer price of 25 sen.

Spring Art is a ready-to-assemble furniture products maker, based in Muar.

Meanwhile, Sapura Energy gained 1.5 sen to 28.5 sen as at 10.30am. It hit 29 sen in the first trading hour. A total 178.78 million shares traded since the opening bell.

Although the oil & gas giant’s shares have been actively traded, it has yet to join the current share price rally that many of its peers are enjoying.

While the stock is not quite a “screaming buy”, nonetheless six analysts are recommending it to clients to add to their portfolios, according to Bloomberg.

The average target price of Sapura Energy is 35 sen — more than 20% upside from current levels.

The group is due to release earnings numbers for its third financial quarter ended Oct 31 next month.

Probably investors are awaiting the financial figures to gauge a better bearing on the oil & gas giant’s prospects. 

Penang-based Pentamaster Corp Bhd’s stellar set of quarterly results could be adding fuel to its current upward trend on it share price. 

While most semiconductor-related players have experienced earnings contraction for the third quarter ended Sept 30, Pentamaster achieved 25.56% growth in net profit to RM21.48 million, on the back of higher revenue from the automated test equipment (ATE) operating segment.

Quarterly revenue was up 15.08% at RM124.63 million versus RM108.3 million previously, according to the group’s filing with the local stock exchange.

CGS-CIMB raises its target price to RM5.40 from RM5.10, after it upped earnings per share forecasts by 3% to 5% for better margin delivery from factory automation solutions segment and lower tax expense due to its pioneer status.

“We peg our valuation to 19.6x CY21F P/E, which is a 10% premium over our target semiconductor equipment sector mean P/E of 17.8x.

“Earnings-accretive acquisitions such as TP Concept, new customer wins in China and a weaker ringgit versus the US dollar, are potential re-rating catalysts. Meanwhile, delays in 3D-sensing adoption in smartphones and intense competition are key downside risks,” wrote CGS-CIMB analyst Mohd Shanaz Noor Azam in his research note this morning.

Pentamaster is currently hovering at its record high. The stock gained three sen at RM4.78. 

Will the good set of quarterly results be convincing enough for investors to hold on to the stock, which price has tripled this year alone? 

It was at a stock traded below RM1 before June 2017.

Unlike other oil & gas companies which have restructured and improved financials, Barakah Offshore Petroleum Bhd seems to still be struggling its way to the recovery path.

Barakah announced to Bursa Malaysia yesterday that its wholly-owned subsidiary PBJV Group Sdn Bhd had received a petition for winding-up dated Oct 25 from its creditor Eureka Efektif Sdn Bhd. 

An amount of RM1.7 million was stated in the petition, being alleged total amount due and owing by PBJV to Eureka. 

This is one of the creditors who have failed to obtain payment from Barakah.

The Practice Note 17 company last Friday (Nov 1) said its independent auditor Crowe Malaysia PLT has issued a disclaimer of opinion of the group’s financial statements for the year ended June 30, 2019 (FY19).

The auditor said it is not expressing an opinion on the group and the company's financial statements, because it has not been able to obtain sufficient appropriate audit evidence to ascertain the appropriateness of the preparation of the financial statements of the group and the company, on a going concern basis.

Barakah’s balance sheet as at June 30 showed the company has trade payables of RM257.3 million, while long term borrowings was at RM152.19 million. 

Its cash balance was at RM83.19 million. It has accumulated losses of a whopping RM345.26 million.