IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/pentamaster-corp-bhd" target="_blank" data-smartkarma-citation="entities:15302:1" rel="noopener">Pentamaster Corp (PENT MK)</a> specialises in the manufacturing of automated testing equipment (ATE segment) and the provision of factory automated solutions (FAS segment). </li>
<li>Pentamaster's solid track record, exposure to structural trends (electric vehicles), profitability, cash generation and healthy balance sheet are attractive. The shares are up 12.9% YTD.</li>
<li>However, the shares reflect this story and the valuation looks full compared to peers and historical multiples. We like the fundamentals and would be buyers of any prolonged weakness.</li>
</ul>



Pentamaster Corp (PENT MK) specialises in the manufacturing of automated testing equipment (ATE segment) and the provision of factory automated solutions (FAS segment). 
Pentamaster's solid track record, exposure to structural trends (electric vehicles), profitability, cash generation and healthy balance sheet are attractive. The shares are up 12.9% YTD.
However, the shares reflect this story and the valuation looks full compared to peers and historical multiples. We like the fundamentals and would be buyers of any prolonged weakness.


Pentamaster Corp (PENT MK): Good Story, at What Price?

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11019:1" rel="noopener">AEM (AEM SP)</a> posted 1Q21 results which were relatively soft YoY. Management noted that 1Q21 was still much stronger than 1Q19 and 1Q20 was an anomaly. AEM also shared annual guidance between 460-520M SGD for 2021. This was the first time management shared guidance for the year. Given AEM's history we believe this guidance is conservative.During the call the CEO and CFO were confident that growth would significantly pick up from 3Q21 as its largest customer <a href="https://www.smartkarma.com/entities/intel-corp" target="_blank" data-smartkarma-citation="entities:16764:1" rel="noopener">Intel Corp (INTC US)</a> ramps up requirement for its latest test handlers. Longer term the company is hopeful to announce multiple new significant customer wins by 2022. This has been a multi-year process which could now bear fruits next year and would be an important catalyst for the company. We remain convinced AEM also becomes an M&amp;A target at some point which provides downside support to the stock.Nothing in 1Q21 results changes the long-term bull thesis on AEM. Fair Value remains unchanged 5 SGD (40% upside).

AEM (AEM SP) posted 1Q21 results which were relatively soft YoY. Management noted that 1Q21 was still much stronger than 1Q19 and 1Q20 was an anomaly. AEM also shared annual guidance between 460-520M SGD for 2021. This was the first time management shared guidance for the year. Given AEM's history we believe this guidance is conservative.During the call the CEO and CFO were confident that growth would significantly pick up from 3Q21 as its largest customer Intel Corp (INTC US) ramps up requirement for its latest test handlers. Longer term the company is hopeful to announce multiple new significant customer wins by 2022. This has been a multi-year process which could now bear fruits next year and would be an important catalyst for the company. We remain convinced AEM also becomes an M&amp;A target at some point which provides downside support to the stock.Nothing in 1Q21 results changes the long-term bull thesis on AEM. Fair Value remains unchanged 5 SGD (40% upside). 

AEM: Temporary Weakness Creates Buying Opportunity Going into New Product Cycle as of 3Q21

Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

Pentamaster International / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/pentamaster-international-ltd" target="_blank" data-smartkarma-citation="entities:31099:1" rel="noopener">Pentamaster International (1665 HK)</a> is a Malaysian company spun-out of Pentamaster Corporation and listed in Hong Kong in January 2018. It sells automated test equipment and factory automation solutions.Due to the adoption of 3D sensors within smartphones, it is seeing a strong increase in sales with its revenue growing by 45% per annum from 2014 to 2019. 3D sensing is at the early adoption stage and should grow rapidly over the next five years. Pentamaster has a strong relationship with its customers, creating customized products with customers often more than one year ahead of the final sale. The company continues to expand its product offering to diversify across sectors and throughout the value chain.Pentamaster has a healthy financial position with net cash equal position. It is also very profitable with a five-year average return on invested capital of 65.7%. Due to minimal investment requirements, ROIC increased from 16% in 2015 to 132% in 2019. There are no corporate governance concerns.Despite Pentamaster’s quality and growth, there is 98% upside to base-case 2025 fair value per share of HKD3.33. The pandemic has caused production and installation delays causing the sales in the first nine months to fall by 15%. The company believes its long-term growth outlook is only temporarily impacted by the pandemic.The combination of growth and valuation makes Pentamaster International an attractive investment opportunity. Pentamaster International is preferred over <a href="https://www.smartkarma.com/entities/pentamaster-corp-bhd" target="_blank" data-smartkarma-citation="entities:15302:1" rel="noopener">Pentamaster Corp (PENT MK)</a> due to its valuation. Pentamaster International trades at 13 times 2019 earnings, while Pentamaster Corporation trades at 42 times 2019 earnings. Because of its recent listing, Pentamaster International is not as well known by investors in Hong Kong. There is also the cross-border listing, which typically leads to a discount.

Pentamaster International (1665 HK) is a Malaysian company spun-out of Pentamaster Corporation and listed in Hong Kong in January 2018. It sells automated test equipment and factory automation solutions.Due to the adoption of 3D sensors within smartphones, it is seeing a strong increase in sales with its revenue growing by 45% per annum from 2014 to 2019. 3D sensing is at the early adoption stage and should grow rapidly over the next five years. Pentamaster has a strong relationship with its customers, creating customized products with customers often more than one year ahead of the final sale. The company continues to expand its product offering to diversify across sectors and throughout the value chain.Pentamaster has a healthy financial position with net cash equal position. It is also very profitable with a five-year average return on invested capital of 65.7%. Due to minimal investment requirements, ROIC increased from 16% in 2015 to 132% in 2019. There are no corporate governance concerns.Despite Pentamaster’s quality and growth, there is 98% upside to base-case 2025 fair value per share of HKD3.33. The pandemic has caused production and installation delays causing the sales in the first nine months to fall by 15%. The company believes its long-term growth outlook is only temporarily impacted by the pandemic.The combination of growth and valuation makes Pentamaster International an attractive investment opportunity. Pentamaster International is preferred over Pentamaster Corp (PENT MK) due to its valuation. Pentamaster International trades at 13 times 2019 earnings, while Pentamaster Corporation trades at 42 times 2019 earnings. Because of its recent listing, Pentamaster International is not as well known by investors in Hong Kong. There is also the cross-border listing, which typically leads to a discount.

Pentamaster International (1665:HK): An Undervalued Beneficiary of Long Term Growth Trends

<a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11019:1" rel="noopener">AEM Holdings (AEM SP)</a> published great 9M20 results. Management will give FY21 guidance in January but sounded upbeat on its prospects going into FY21.AEM has hired an entire new CEO/CFO/CTO suite over the past 18 months. We believe this highly qualified new C-suit would not have joined AEM if they did not see a clear path of making AEM into a 1 billion USD company going forward. YTD the share price of AEM is up by 75% but has come off its earlier highs. Given FY21 guidance uncertainty and muted consensus expectations (2% revenue growth in FY21 and -1% growth in FY22) we like the risk/reward set-up. The downside is protected by <a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11019:1" rel="noopener">AEM Holdings (AEM SP)</a> becoming a takeover target itself at some point but not before the maximum value has been extracted by the current management team.Fair Value of 5 SGD remains (this is based on 10x 2020 EV/EBITDA or 14.7x 2020 P/E). Peers trade at an average of 26.1x 2020 P/E and 16.9x 2020 EV/EBITDA.

AEM Holdings (AEM SP) published great 9M20 results. Management will give FY21 guidance in January but sounded upbeat on its prospects going into FY21.AEM has hired an entire new CEO/CFO/CTO suite over the past 18 months. We believe this highly qualified new C-suit would not have joined AEM if they did not see a clear path of making AEM into a 1 billion USD company going forward. YTD the share price of AEM is up by 75% but has come off its earlier highs. Given FY21 guidance uncertainty and muted consensus expectations (2% revenue growth in FY21 and -1% growth in FY22) we like the risk/reward set-up. The downside is protected by AEM Holdings (AEM SP) becoming a takeover target itself at some point but not before the maximum value has been extracted by the current management team.Fair Value of 5 SGD remains (this is based on 10x 2020 EV/EBITDA or 14.7x 2020 P/E). Peers trade at an average of 26.1x 2020 P/E and 16.9x 2020 EV/EBITDA.

AEM Holdings: Optimistic on FY21; Fair Value Remains at 5 SGD (41% Upside)

<div><a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11019:1" rel="noopener">AEM Holdings (AEM SP)</a> posted stellar 1H20 results and raised its 2020 guidance. The margin improvement was strong as NPM doubled from 14.8% to 20.2%. Long-term the company's TAM continues to rise and diversification away from core-client <a href="https://www.smartkarma.com/entities/intel-corp" target="_blank" data-smartkarma-citation="entities:16764:1" rel="noopener">Intel Corp (INTC US)</a> will gather pace in FY21-22. As chips get more complicated, more system-level testing will be needed remains the crux of the investment case. The trend of working at home, data centers, 5G, and AI all necessitate more complex chips.</div><div>
While investors in ASEAN SMIDcaps often have to worry about the alignment of the promoters and the interests of minorities we believe they are aligned at AEM. Free float is over 83% which also makes AEM a prime takeover candidate, but not before maximum value has been extracted by the current management team.
It is too early to have any visibility into 2021's order book but management did note its new test handler is now with its key client for testing. The hope is a demand for this new generation test handler will be large. The risk is demand for the new test handler is weak and FY20 will prove to be peak profits for AEM.
Our previous Fair Value was 3.7 SGD, but is now raised to 5 SGD which would mean the company has a 1 billion USD market cap. Many global funds have this as a cut-off point so expect AEM to get on the radar of many new investors. This also increases the likelihood of coverage by large international brokers and potentially a dual listing on Nasdaq at some point.
</div>

AEM Holdings (AEM SP) posted stellar 1H20 results and raised its 2020 guidance. The margin improvement was strong as NPM doubled from 14.8% to 20.2%. Long-term the company's TAM continues to rise and diversification away from core-client Intel Corp (INTC US) will gather pace in FY21-22. As chips get more complicated, more system-level testing will be needed remains the crux of the investment case. The trend of working at home, data centers, 5G, and AI all necessitate more complex chips.
While investors in ASEAN SMIDcaps often have to worry about the alignment of the promoters and the interests of minorities we believe they are aligned at AEM. Free float is over 83% which also makes AEM a prime takeover candidate, but not before maximum value has been extracted by the current management team.
It is too early to have any visibility into 2021's order book but management did note its new test handler is now with its key client for testing. The hope is a demand for this new generation test handler will be large. The risk is demand for the new test handler is weak and FY20 will prove to be peak profits for AEM.
Our previous Fair Value was 3.7 SGD, but is now raised to 5 SGD which would mean the company has a 1 billion USD market cap. Many global funds have this as a cut-off point so expect AEM to get on the radar of many new investors. This also increases the likelihood of coverage by large international brokers and potentially a dual listing on Nasdaq at some point.


AEM: Onwards to $1 Billion Market Cap; Now More Attractive as M&A Target with Biz Diversification

Malaysia

Pentamaster Corporation Berhad is an investment holding company.  The Company, through its subsidiaries, manufactures automated and semi-automated machines and equipment, designs and manufactures precision machinery components, as well as assembles and installs computerized automation systems and equipment.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Pentamaster Corp (PENT MK)