PENTAMASTER CORP - Next gem in the making

1. Company Background

Pentamaster Corporation Berhad is a Malaysia-based company engaged in investment holding and provision of management services.

Through its subsidiaries, the Company operates in five segments: designing and installation of automation systems and contract manufacturing; manufacturing of automated and semi-automated machinery and equipment; designing and manufacturing of precision machinery components; development and implementation of information technology system, and designing and manufacturing of automated testing equipment and test and measurement system.manufacturing.

2. Financial Performance

                     

In term of net profit, PENTA was able to turn from net loss in year 2012 to net profit of MYR4.65m in year 2014. If we look at recent few quarter result, there is significant growth of EPS.  Coming quarter is expected to be good judging from track record from last few year.

For latest quarter report, the group recorded higher revenue at RM28.6 million in the current quarter as compared to RM19.3 million registered in the corresponding quarter last year.

The higher revenue recorded was mainly due to increase in sales from automated equipment operating segment and revenue contribution from smart control solution system which was partially offset by the lower revenue from automated manufacturing solution operating segment.

Due to the higher revenue achieved and better product mix secured, the Group recorded a higher profit before tax of RM4.2 million in the current quarter as compared to the pre-tax profit of RM1.4 million in the previous corresponding quarter.

3. Basic FA

Basically, Penta had improved its fundamental in this recent years, by implementing below actions:

• Disposal of its loss making subsidiaries
• Acquisition of Origo to diversify into property project management
• Acquisition of land to build a new plant for expansion

EPS : 9.96

NTA :0.576

PE    : 7.8

ROE :16.28

Net income margin: 14.4%

M.Capitalization: RM107M

EBIT         : 17.5M

Deposit/cash : 16.9M

Short term bank borrowing: RM175K

T.Asset    : RM105.7M

T.Liability: RM21.6M

T. Equity  :RM84.1M
EY: 17%

4. Basic TA

After good quarter earning, we can see that buying volume is increasing with Volume EMA above average volume. Currently, for moving average, Penta is above 20d EMA, 70d sma and 200d sma which shows bullish sign.

For above chart, the trading price for Penta is close to upper band which shows buyer's interest is relatively strong. Parabolic indicator also shows Penta on uptrending trend with strong Force Index to reinforce bullish trend. Stochastic indicator is currently neutral, no overbought or no oversold. 

In conclusion, it is pretty obvious that Penta is on strong uptrend at the moment.



5.  Ownership Summary

For ownership summary, we can note that insider & public made up of  around 96% of total share. One may wonder on why not much funds are interested in investing in Pentamaster?  Small cap with low liquidity or erratic earning? 

6. Valuation: 

Based on projected PE 10.5  : 0.974 x 10.5=  RM1.03
(PE 10.5 is derived from 30% discount from sector PE at 15 judging from Penta smaller market cap)

Based on EV/EBIT=8  projection:       FV= RM1.05
(Projection is based on 10% minimum growth)

(22.5*EPS*Book value per share)^0.5 :RM1.12

7. Strategy

Based on current price (7July 2016),

Entry :RM0.78
TP    :RM1.1
Breakout:  RM0.82, RM0.90
Stop loss:   < RM0.73 

Short term TP: RM0.90

Potential gain : 41%
Potential loss  : 6.8%


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information contained herein
Disclaimer: This is a personal weblog, reflecting my personal views and not the views of anyone or any organization, which I may be affiliated to. All information provided here, including recommendations (if any), should be treated for informational purposes only. The author should not be held liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein.

9 sneaky psychology tricks companies use to get you to buy stuff

                                       

From Facebook ads to TV commercials, you’re constantly being bombarded by people trying to sell you stuff.

And marketers may not be scientists, but they’ve mastered the art of using your psychology against you. By exploiting your vulnerability to different style of propaganda, companies can trick you into buying more stuff and paying more for it.

We’ve scoured the research on some of the strategies marketers use to lure in consumers, so you can catch them in their own game:

Priming

It’s well-known in psychology that being exposed to one idea or concept can affect your response to another, related thing. For example, you’re more likely to recognize a word like “tasty” after seeing a picture of a delicious meal than after a picture of a garbage dump. 

In a 2002 study, researchers measured how a webpage’s background influenced consumers looking to buy a car. When the background was green with pennies on it, customers spent more time perusing the cost info, but when the background was red with flames, they spent more time looking at the safety section.

The decoy effect

Sometimes, a company will include an additional price option just to make you think you’re getting a deal.

Duke professor of psychology and behavioral economics Dan Ariely did a study of a marketing strategy used by The Economist, as he described in a TED talk. The magazine offered three subscriptions: an online subscription for $59, a print subscription for $125, and a print-and-online subscription for $125.

When Ariely offered 100 students the three options, most students picked the online-print combo, since it seemed like the best deal. But when he took out the print-only option, most students picked the cheaper, online-only one.

The illusion of scarcity

People are more likely to desire things if they seem like scarce resources. 

In a classic study in 1975, researchers showed 200 people two identical cookie jars, except one had 10 cookies and the other had just two. Surprisingly, people rated the cookies in the empty jar as more valuable.

Today, airlines and other companies use the scarcity principle all the time (think “only a few tickets left at this price!”). 

Loss aversion

Ever wonder why companies offer free trials? The reason links back to the results from 1990 study conducted by Nobel-winning psychologist and behavioral economist Daniel Kahneman and his colleagues.

The group ultimately found that people are more likely to act when they have something to lose, as opposed to gaining the same thing. That’s why companies offer free trials, so customers will want to keep subscribing after the trial period is over.

In the study, Kahneman and his colleagues gave people mugs, chocolate, or nothing. People then had the option of keeping their items or trading with someone else.

About 86% of those given mugs chose to keep their mugs, whereas only half of those who started with nothing chose mugs, and just 10% of people given chocolate traded for them.

Reciprocity

As psychologist Robert Cialdini writes in his book “Influence: The Psychology of Persuasion,” if someone does something for you, you’re more likely to want to do something for them. Simply put: you scratch my back, I’ll scratch yours.

Cialdini has found that when a restaurant server brings the check with one mint, people will tip 3.3% higher than normal. And with two mints, they’ll tip a whopping 20% more!

Think about that the next time you go out to eat.

Social proof

Basically, people tend to do something simply because other people are doing it (a.k.a. going with the herd).

Psychologist Robert Cialdini writes in his book that this is why TV sitcoms used canned laughter, which makes you think something is funny just because you hear other people laughing at it.

Or take social media — people or brands will often buy “ghost followers” who aren’t real people, to make others think they have a large following.

Anchoring

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Anchoring refers to the notion that people will make decisions that rely too heavily on the first piece of information they get.

For example, a 2011 study revealed how anchoring affects salary negotiations. Participants gave candidates a higher salary offer when they suggested an implausibly high salary than when they suggested a realistic one.

Companies often use this tactic with sales, where they set an “anchor” price and show you how much the product has been marked down. For instance, you may be willing to pay $50 for a new shirt if it’s been discounted from $100, even if it’s more money than you would usually pay.

The Baader-Meinhof Phenomenon

Also known as the frequency illusion, this is the effect where you see something once, and suddenly you start seeing it everywhere. And companies use this to their advantage to sell you products.

According to Pacific Standard, the term Baader-Meinhof phenomenon was invented in 1994 by an online commenter, who heard the name of the ultra-left-wing German terrorist group twice in a 24-hour period. Stanford linguistics professor Arnold Zwicky coined the term “frequency illusion” in 2006.

It comes down to two things. When you first come across a new word, thing, or idea, you unconsciously start noticing it because of something called “selective attention.” Then, each time you see it is additional proof that it’s everywhere, a phenomenon known as confirmation bias.

The power of anecdote

People like stories. It’s that simple.

Psychologists Christopher Chabris and Daniel Simons, authors of “The Invisible Gorilla,” say we value stories over statistics because individual examples stick in our brains better.

Research suggests that the reason stories are so persuasive is that they transport us to a place where we’re more likely to believe in something. Other research shows that people who seek out emotional situations and ones who enjoy thinking were both likely to be transported by stories.

Maybe that’s why so many ads feature customer testimonials, because they tell a story we can identify with.

Source:  http://www.businessinsider.my

RM20k salary for a family is not enough in Klang Valley ?

RM20k not enough (don’t love own kids version)

Income = RM20,000

RM20,000 – RM2,000 (EPF) = RM18,000

RM18,000 – RM3,500 (Tax) = RM14,500

RM14,500 – RM2,000 (1 god car and one Iriz for husband and wife, around 140k, installment around 2k for 5 years loan) = RM12,500

RM12,500 – RM4,500 (House, PJ terrace house is 1M these days, loan 900k or 4.5k a month) = RM8,000

RM8,000 – RM1,000 (Public school for 2 kids since we hate our kids and want them to be stupid. But we still provide tuition and other classes for the 2 brats) = RM7,000

RM7,000 – RM1,000 (Mom is housewife so cook at home save money. Ikat perut since we hate our family) = RM6,000

RM6,000 – RM2,000 (Give parents and parents in-law money 2k monthly) = RM4,000

RM4,000 – RM500 (Astro, internet, ipon = RM500, lets share phone plan…cheaper plan also save money yo) = RM3,500

RM3,500 – RM200 (Children pocket money) = RM3,200

RM3,200 – RM1,000 (Car, petrol, toll and maintenance) = RM2,200

RM2,200 – RM1,000 (Wife pocket money) = RM1,200

RM1,200 – RM500 (Holiday once a year within SEA , RM6k for 4 people or RM500 monthly) = RM700

RM700 – RM200 (Electric and Water Bill) = RM500

RM500 – RM500 (Misc expenses) = RM0

Savings = RM0

Pity, save kao kao and mistreat own kids pun not enough.

Source: http://www.funnymalaysia.net/

Fund manager's stock pick 2016

MONEM A. SALAM

President of Saturna Sdn Bhd

Stock pick: Gamuda Bhd

GAMUDA Bhd is a good construction proxy to buy into to ride out the challenging market environment.

The group has strong prospects in the next few years and has an excellent track record in carrying out infrastructure projects.

As a regional fund management company, we do keep a close look at the construction sector throughout Asean.

The most prominent feature we have seen in Malaysia is that the government’s expenditure allocation for major infrastructure projects tend to be executed successfully, unlike some of its regional peers.

These projects are executed well via the project delivery partner structure. Note that Gamuda won two major projects as a PDP in 2015 – the RM27bil Penang Transport Masterplan Project and the RM25bil KVMRT Line II.

As an established construction player, Gamuda is set to make inroads on several fronts.

In 2016, we foresee that the group will be keen on bidding for Sarawak’s Pan Borneo Highway project. It has vast experience in road infrastructure works and stand a good chance of winning substantial contracts from this particular project.

Not many realise that Gamuda’s highway concession business is a vital and stable contributor to its cash flow.

Its water and expressway concessions segment contributed RM98mil in pre-tax profits in Gamuda’s latest quarter, or half of its overall pre-tax profits.

A strong balance sheet allows it to leverage when undertaking new construction projects.

We believe that Gamuda will have no trouble gearing up. It has been in a similar situation previously and successfully executed such ventures.

However, there are some caveats. The Government may yet consider reducing its budget given prevailing low oil prices. Any cuts will likely affect expenditure allocated towards infrastructure investments, which could slow down some projects.

PANKAJ KUMAR

Director & head of corporate strategy

KSK Group Bhd

Stock pick: Thong Guan Industries

GIVEN the pessimistic outlook for many sectors within the market, investors will have no choice but look for companies that are insulated from slowing domestic demand, tough economic conditions and beneficiary of weak domestic currency.

The export sector is a sweet spot and given the run that we had seen in 2015 among glove, furniture and chips sector and selected others in the packaging sector. Narrowing down the search, Thong Guan Industries is a rare gem, despite rising some 63% in 2015, the stock is still deemed to be undervalued as it is trading at P/B of about 0.85x and annualised forward 2015 basic PER of about 10.5x, which is still a bargain.

Thong Guan is also a net cash company, with cash of about 20 sen per share. Growth for the company will basically come from new capacity installation, which is 33-layer nano-technology stretch film line is expected to be ready soon. Thong Guan also raised its production capacity of PVC food wrap to 720 million tonnes with the installation of 2 additional lines this year.

These are key drivers for both topline and bottomline growth. With the new capacity, Thong Guan is rightly placed to benefit to rising demand for plastic films and this could drive earnings by 10%-15% in 2016.

Some 90% of Thong Guan’s revenue comes from plastic films and the current low oil price basically translates to lower selling prices for plastic and hence increase in demand. With a favourable exchange rate, Thong Guan is a winner due to lower input cost as close to 80% of its revenue are derived from exports.

KALADHER GOVINDAN

Head of research, TA Securities

Stock pick: SKP Resources Bhd

EXCITEMENT in a company’s shares always hinges on its track record, ability to deliver strong earnings growth and generate cash flows to reward shareholders with dividends.

SKP Resources Bhd fits this bill. Despite reporting a profit growth of 43% in the last financial year, the company is expected to record a 3-year earnings CAGR of 68.2% until 2018 based on our projections.

This growth will be underpinned by the RM1bil annual orders from its main customer, Dyson, to produce cordless vacuum cleaners. Considering this new source of demand is only taking up about 25% of its newly enlarged 20-assembly line facility that came on board last September, growth potential is enormous. Dyson plans to launch 100 new products by 2018 to satisfy increasing demand for its products and services.

SKP has also mitigated operational risks by having specific agreements with clients to pass through nearly 100% of costs related to changes in raw material prices and currency fluctuations. This not only provided business stability but also some predictability.

SKP has a high ROE of 40% and a strong balance sheet. With current net gearing of only 4.5%, it is expected to turn net cash soon on the back of strong profit growth and cash flows. Thus, our expectations for future dividend yield to remain attractive around 4.6% to 6% are not far-fetched.

While having Dyson as a single largest customer can be considered as a major risk, the management is aware of that and has taken a proactive step by acquiring the subsidiaries of Technic to diversify the product range and customer base. It has also succeeded in growing the business through a win-win strategy that has strengthened the relationship, for the partnership to continue into distant future.

The fair value ascribed to SKP Resources shares is RM2 based on a calendar year (CY) 2016 price earnings (PE) multiple of 18 times, which will dwindle to 16 times and 10 times in CY17 and CY18 respectively on the back of robust earnings growth.

AZLAN HUSSIN

CEO of MIDF Amanah Asset Management Bhd

Stock pick: Brahim’s Holdings Bhd

BRAHIM’S Holdings Bhd is involved in the food and beverage (F&B) business with its main contribution coming from the airline in-flight catering business.

The airline catering industry is a highly regulated industry due to the health and safety requirements and the Malaysian market is practically dominated by Brahim’s.

Due to the restructuring exercise taking place at Malaysia Airlines, Brahim’s earnings were affected as new contracts entered into were less favourable than before. This resulted in a selldown of Brahim’s shares.

Still, Brahim’s unique niche position in this industry allows them to focus on the provision and supply of halal meals. A key “game changer” for the group is the emergence of Singapore-listed SATS Ltd as a new strategic shareholder. Brahim’s should be able to leverage and benefit from the “halal-hub” position Malaysia is pushing for and from other government initiatives, especially in the tourism segment. We expect the potential for cost-benefit efficiencies of Brahim’s to improve further moving forward with their new business model.

Brahim’s is currently trading at a price-to-book ratio of 1.1 times which is reasonable given that its regional and global peers trade in the 2-3 times range albeit with a much larger footprint in the in-flight catering business.

Earnings are expected to recover from losses this year and should help support a re-rating of Brahim’s as it heads towards a recovery in 2016. We believe it offers an excellent opportunity to enter the market at a very attractive level.

MICHAEL KURTZ

Global head of equity strategy & chief strategist,

Asia ex-Japan Nomura Securities 

Stock pick: Malayan Banking Bhd

MAYBANK is one of Nomura’s Asia-Pacific ex-Japan’s top picks for 2016.

The bank is well positioned to ride out the competition for deposits among the local banks, in our view. With the largest network of 400 branches nationwide, it has the strongest current and savings account (Casa) and consumer deposit franchises. In spite of the tough competition for low-cost Casa deposits, Maybank has consistently been growing ahead of the industry growth rate over the last 10 years. Even so, given the higher term deposit cost, we expect net interest margins to fall by 8 basis points to 2.24% by FY17F, from 2.32% in FY14.

Compliance with Basel III requirements will lead to greater competition for retail deposits. We do not believe the bank is vulnerable to any particular systemic risk as it has a diversified portfolio and relatively strong risk management.

Maybank reported its 3Q results recently and there were no negative surprises. The underlying operating ratios were relatively stable and we believe the bank is in a strong position to withstand the current challenges.

Our price target of RM9.70 is based on an return on equity of 12%.

THOMAS YONG 

CEO of Fortress Capital Asset Management (M) Sdn Bhd

Stock pick: RHB Capital Bhd

Since the termination of its proposed merger with CIMB Bank Bhd, RHB Cap has embarked on an internal re-organisation programme.

In 2015, RHB Cap has completed its implementation of an employee mutual separation scheme that will generate cost savings of RM190mil per annum.

It has also completed a rights issue in December 2015 that raised RM2.3bil. This capital raising exercise effectively strengthens its core equity Tier-1 capital ratio to about 11%, meeting the BASEL III requirement.

RHB Cap will proceed with an internal restructuring to establish RHB Bank Bhd as the group’s listed holding company, assuming RHB Cap’s listing status. This will improve tax efficiencies and eliminate holding company inefficiencies.

Regional expansion is progressing healthily and we expect to see further growth from regional businesses compared to the current 14% contribution to top line.

Our primary premise for picking RHB Cap is its attractive valuation. Its current share price trades at a price-to-earnings ratio of 8.8 times and a price-to-book ratio of 0.72 times, which is lower than the level seen during the global credit crisis in 2008.

This valuation level should allow the stock to withstand any near term market challenges and offers investors an opportunistic base for price revaluation going forward.

NIGEL FOO

Senior analyst of CIMB Research

Stock pick: MyEG Services Bhd

OVER the next one to two years, foreign workers working permit renewal services are expected to be the MyEG Services Bhd’s main earnings contributor.

Currently, there are some 2.5 million legal foreign workers in the country, whereby MyEG makes about RM100 in revenue per foreign worker – RM35 for processing fees paid by the government and RM65 from commission selling compulsory foreign workers insurance.

MyEG is expected to register 1 million illegals in the financial year 2016 (FY16), which is a conservative figure given that there are an estimated 5 million illegal foreign workers in the country.

If the company could register 2 million illegal foreign workers, FY16 and FY17 earnings per share could be boosted by 18%-22%.

For the financial year ended June 30, 2015, MyEG posted revenue of RM141.52mil compared to the RM109.87mil the year before.

The improved revenue translated into a 35.8% increase in profit after tax to RM68.05mil from last year’s RM50.11mil.

Overall, potential catalysts for the stock include stronger than expected revenue from the foreign worker permit renewal services and undemanding stock valuations.

VINCENT KHOO

UOB KayHian Research

Stock pick: WCT Holdings Bhd

WITH RM2.8bil worth of jobs secured last year, WCT Holdings Bhd’s order book makes up 4.1 times of its 2014 construction income.

Besides the decade-high order book of RM5bil, margins for the outstanding jobs are also higher due to the slew of infrastructure contracts that could bring its pre-tax margins to between 5% and 8%.

The upcycle seen in the construction industry is among the few main reasons that WCT is one of UOB KayHian Research’s top picks. UOB KayHian sees earnings contribution from its bread and butter construction arm, which should come in as early as the first quarter.

There could be upside surprises if the company clinches more contracts going forward. It is tendering for construction jobs worth RM4.9bil.

Following the paring down of its stake in the 608 acres in Serendah to UEM Sunrise Bhd in December, there is the possibility of more asset monetisation in future.

WCT is in active discussions to unlock the value of its investment properties through a real estate investment trust structure, which could start with the Bukit Tinggi Shopping Centre and the Paradigm Mall in Kelana Jaya.

Both have a combined value of RM853mil and earnings before interest, taxes, depreciation and amortisation of RM70mil.

Another catalyst is the RM1bil cash settlement that it could recover from the arbitration case in Dubai for the next two to three years.

Source: http://www.thestar.com.my/