KUALA LUMPUR: Pantech Group Holdings Bhd is expected to secure more contracts from the palm oil industry on the back of strong palm oil prices, Mercury Securities Sdn Bhd.
The research house expects the contribution from this segment to the company's revenue to increase to 20 per cent for the financial year 2023 (FY23), up four per cent from FY21.
"With more than 30,000 stock-keeping units (SKUs), the company is better positioned to meet rising customer demands," it said.
Meanwhile, Mercury Securities said Pantech is in the right position to benefit from Petroliam Nasional Bhd's (Petronas) capital expenditure (capex) cycle.
The firm said Petronas had allocated 20 per cent of planned capex over the next five years from FY22.
"This suggests a positive industry outlook, potentially adding a tally to the company's current order book of RM400 million as of October 1, 2022, expected to be fully recognised within nine months to 1.5 years.
"With more than 70 per cent of the company's earnings derived from this sector, Pantech is in the right position to benefit from the capex cycle," it said.
Mercury Securities has revised its FY23 and FY24 revenue and profit forecasts upward by 3.8–27.5 per cent and 1.0–26.2 per cent.
The firm has maintained a Buy recommendation on Pantech with a revised target price of 93 sen.
"We like the stock due to its attractive dividend yield and cheap valuations.
"The target price represents a potential return of 47.6 per cent over the current price," it added.
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