Pensonic’s share price surges despite lower profit
Alan Voon 
Pensonic suffered a 12% drop in revenue to RM341.09 mil for financial year ended May 31
THE share price of electrical and electronic appliances maker Pensonic Holdings Bhd has been inching up after the company announced its fourth quarter results for FY ended May 31 on July 25.

This is despite the company recording a lower profit.

From the closing price of 63 sen on that day, Pensonic’s shares climbed more than 13% to close at 71.5 sen on Aug 9. However, its warrant, PENSONI-WB, did not outperform the mother share price’s rise during this period and only managed a 10.4% rise to closed at 26.5 sen on Aug 9.

This may have been due to a two sen dividend in which the warrant holders are not entitled to.

In its financial year ended May 31, Pensonic suffered a 12% drop in revenue to RM341.09 mil from RM386.26 mil in the previous financial year. The group’s net profit declined 43% to RM6.38 mil from RM11.25 mil in FY ended May 2016. However, its net asset per share improved to 92 sen.

In notes accompanying its latest results, Pensonic indicated that despite posting lower revenue, it has been able to maintain its gross profit margin. Nonetheless, the group continued to face a challenging macro economy which necessitated higher advertising and promotional expenses to improve sales and market shares which in turn led to the lower bottom line.

Commenting on its prospects, Pensonic expects to face more challenges. It is implementing cost rationalisation, built around operational efficiency and optimisation of resources as it strives to reinforce the group’s business strengths and capabilities.

Pensonic had successfully secured the distributorship for MYTV set-top box (decoder) in anticipation of the digitalisation of the Malaysian television broadcasting next year.

By then, all households will require the decoders to receive TV signals for continued access to free-to-air TV channels. This distributorship is anticipated to contribute to Pensonic’s revenue in the short-to-medium term.

With its recent underperformance relative to the mother share, PENSONI-WB is currently trading at a premium of 21% which is not high for a warrant with more than six years to expiry.

It is also undervalued theoretically as its implied volatility is lower than the mother share’s historical volatility. It is strange to see Pensonic’s share price rising strongly after reporting a substantially lower profit.

This may lead to investors speculating something might be brewing ahead. Those who are bullish on the continued rise of Pensonic’s mother share are expected to enjoy a better percentage gain with the warrant moving forward.

The writer is CEO of Warrants Capital Sdn Bhd

This article first appeared in Focus Malaysia Issue 245.