{"id":9757,"date":"2021-03-24T07:00:14","date_gmt":"2021-03-23T23:00:14","guid":{"rendered":"https:\/\/www.smallcapasia.com\/?p=9757"},"modified":"2021-03-23T11:54:37","modified_gmt":"2021-03-23T03:54:37","slug":"pestech","status":"publish","type":"post","link":"https:\/\/www.smallcapasia.com\/zh-hant\/pestech\/","title":{"rendered":"[MY] Pestech Int’l Berhad: 10 Quick Things You Should Know"},"content":{"rendered":"

Pestech International Bhd (KLSE: 5219) (PIB) is a listed integrated electric power technology company in Malaysia. <\/span><\/p>\n

It derives income from engaging in projects of engineering, procurement, manufacturing, construction and the commissioning of power substations, transmission lines and rail electrifications in Malaysia and Cambodia.<\/span><\/p>\n

\"pestech<\/a><\/p>\n

Without further ado, lets zoom into 10 quick things about PIB:\u00a0<\/span><\/p>\n

1. Profitability\u00a0<\/b><\/h2>\n

In 2017, PIB has successfully clinched the following main orders:<\/span><\/p>\n

\"\"<\/a><\/p>\n

In addition, PIB has acquired Colas Rail System Engineering Sdn Bhd, a company that was awarded with the MRT 2 system project. Thus, they resulted in growth in revenues from RM 500 million levels in 2016-2017 to RM 800 million levels in 2018-2020.\u00a0<\/span><\/p>\n

Despite the rise in revenue, its shareholders\u2019 earnings had maintained at RM 70 million a year for the last 5 years. PIB had recorded higher earnings in 2017 and 2019 for PIB made higher unrealised gains on foreign exchange in both years. <\/span><\/p>\n

In 2020, PIB had recorded RM 51.5 million in shareholders\u2019 earnings, the lowest in 5 years due to it incurring a fair value loss on derivative financial instruments.<\/span><\/p>\n

\"\"<\/a><\/p>\n

In view of its past 12 months, PIB has reported RM 50.8 million in shareholders\u2019 earnings or 6.65 sen in earnings per share (EPS).<\/span><\/p>\n

\"\"<\/a><\/p>\n

2. Cash Flow Management\u00a0<\/b><\/h2>\n

In 2016-2020, PIB incurred RM 570.3 million in operating cash outflows. PIB has reported cash outflows for its contract customers. <\/span><\/p>\n

It also incurred a total of RM 124.4 million in net acquisitions of property, plant & equipment (PP&E) and RM 220.0 million in acquisition of concession assets in 2016. <\/span><\/p>\n

These are funded by a net addition in its short-term & long-term borrowings of RM 947.0 million.\u00a0<\/span><\/p>\n

3. Balance Sheet Strength<\/b><\/h2>\n

In Q2 2021, PIB had reported RM 719.7 million in non-current liabilities and RM 524.3 million in shareholders\u2019 equity. <\/span><\/p>\n

Thus, its gearing ratio is 137.3%. Also, PIB\u00a0 reported RM 1.33 billion in current assets & RM 1.10 billion in current liabilities and thus, having a current ratio of 1.21.\u00a0<\/span><\/p>\n

4. Concession Agreements<\/b><\/h2>\n

PIB\u2019s concession asset constitutes 20.8% of its total assets in Q2 2021, worth as much as RM 519.6 million. This is related to its 60% interests in Diamond Power Ltd (DPL), which is involved in the construction, manufacturing, and servicing of the Kampong Cham – Kratie 230kV transmission system in Cambodia.\u00a0<\/span><\/p>\n

DPL completed the construction of the transmission system in November 2017. It commenced its operation on 1 January 2018 and would be in operations over a period of 25 years. Upon its expiry, DPL would return the transmission system to the Electricite Du Cambodge (EDC).\u00a0<\/span><\/p>\n

5. 2 More Projects Completed in Cambodia\u00a0<\/b><\/h2>\n

In the financial year 2020, PIB completed 2 key projects in Cambodia.<\/span><\/p>\n

\"\"<\/a><\/p>\n

In addition to its Kampong Cham-Kratie 230kV transmission system, PIB started to receive cash flow payments on a monthly basis from EDC.\u00a0<\/span><\/p>\n

6. Future Contracts\u00a0<\/b><\/h2>\n

Since financial year ended 30 June 2020, PIB secured the following contracts:<\/span><\/p>\n

\"\"<\/a><\/p>\n

As at 24 February 2021, Pestech has recorded an outstanding order book at RM 2.2 billion, which is an increase from RM 1.67 billion as recorded in its annual report 2020.<\/p>\n

7. Pestech (Cambodia) Plc\u00a0<\/b><\/h2>\n

On 12 August 2020, PIB had successfully listed <\/span>Pestech (Cambodia) Plc <\/span><\/a>(PCL) on the Cambodia Stock Exchange (CSX).\u00a0<\/span><\/p>\n

According to this news article<\/a>,\u00a0Pestech International Bhd and its consortium partner Furukawa Electric Co Ltd have secured two contracts worth RM165mil in Cambodia.<\/p>\n

Pestech said this is the company’s first successful venture to export extra high voltage underground cable design and laying capability overseas.<\/p>\n

8. Major Shareholders<\/b><\/h2>\n

\"pestech<\/a><\/p>\n

As of 17 March 2021, Lim Ah Hock and Lim Pay Chuan (Paul) are the two major shareholders of PIB with 33.4% and 20.3% shareholdings respectively.\u00a0<\/span><\/p>\n

Lim Ah Hock is the founder of PIB and is appointed as its Executive Chairman. Paul, his nephew, is the Managing Director of PIB. <\/span><\/p>\n

Meanwhile, Stanley Lim Peir Shenq, his son, has been appointed to be its Executive Director in 2020. Hence, the Lim family occupies 3 out of 7 seats in PIB\u2019s board of directors.\u00a0<\/span><\/p>\n

9. Valuation Ratios<\/b><\/h2>\n

As of 18 March 2021, PIB\u2019s stock price is RM 1.12 per share. Thus, based on its latest 12-months EPS of 6.65 sen, its P\/E Ratio is 16.8x.\u00a0<\/span><\/p>\n

That said, it would makes more sense to value Pestech using P\/B approach given the asset-heavy nature of Pestech’s business.<\/span><\/p>\n

\"Pestech<\/a><\/p>\n

Based on the chart above, Pestech’s Price\/NAV is at a historical low of 1.34x across the past 10 years.\u00a0<\/span><\/p>\n

10. Growth Prospects<\/b><\/h2>\n

There are three other potential rail electrification projects available for tender including:<\/span><\/p>\n