Pantech’s planned listing of manufacturing units positive, compelling — Phillip Capital
26 Aug 2024
Pantech Group Holdings Bhd’s (KL:PANTECH) planned listing of its two manufacturing units will allow the company to monetize the business, Phillip Capital said on Monday.
The listing of Pantech Global Bhd — the special purpose vehicle housing Pantech Stainless & Alloy Industries Sdn Bhd (PSA) and Pantech Steel Industries Sdn Bhd (PSI) — will unlock value, raise funds for capacity expansion, and strengthen its global market presence, said Phillip Capital.
“We view this deal positively,” said Phillip Capital, one of only two research houses covering the stock, and maintained its “buy” call on the stock and a target price of RM1.42. “Investors looking to invest into a regional manufacturer may find Pantech Global’s listing to be compelling.”
Shares of Pantech Group have racked up a 16% gain so far this year. TA Securities, the only other research house covering the stock, also has a “buy” call on the stock.
Under the proposed listing, Pantech Global will acquire PSA and PSI from Pantech Group for RM294 million in shares. A total of 587.77 million new shares of Pantech Global at 50 sen apiece will be issued to the holding company for the acquisition.
Upon completion of the proposed acquisitions, Pantech Global will undertake an initial public offering (IPO) of 262.23 million new shares, representing 30.85% of its enlarged issued share capital. The issue price will be determined later.
If IPO shares are priced at 50 sen, Pantech Global would be valued at 8.5 times the earnings in the financial year ended February 2024 (FY2024) and in line with the main holding company’s own valuations at nine times, according to Phillip Capital’s estimates.
The increase in minority interest following the reduced stake in Pantech Global is expected to reduce the house’s earnings projection for FY2026-FY2027 by 7%-8%.
“However, the capital raised for expansion is expected to drive future earnings growth, which has yet to be reflected in our earnings forecasts,” Phillip Capital added.
Source: The Edge Malaysia
