Pentax hits 15-year high on bullish profit report

TOKYO, Apr 7 (Reuters) Shares in digital camera and medical equipment maker Pentax Corp. surged 10 percent on Friday morning to their highest in more than 15 years after a newspaper said its profit would surge 73 percent this business year.

The Nihon Keizai Shimbun predicted that Pentax's group operating profit would climb to around 9 billion yen (.40 million) in the year started this month as its camera division returns to the black and sales of endoscopes grow.

The forecast, which compares with the firm's own outlook for a profit of 5.2 billion yen in the year ended March 31, is higher than the market consensus of 8.0 billion yen but lower than Pentax's 10 billion yen target unveiled last year in a mid-term business plan.

A Pentax spokesman said the reported figures were based on the newspaper's own calculations.

Shares of Pentax rallied as much as 10.2 percent to 813 yen in early trade, a level it last hit in late 1990 at the tail-end of Japan's asset-price bubble. As of 0142 GMT, it was up 8.5 percent at 801 yen, the biggest gainer on the Tokyo Stock Exchange's main board.

''The reported figure is above the consensus and that triggered the rally. If Pentax can hit that number, the stock is fairly valued,'' said JP Morgan analyst Hisashi Moriyama. ''But I have doubts about whether it is achievable.'' Moriyama said an operating profit of 9 billion yen would imply earnings per share of 36 yen. That would give Pentax a price-to-earnings ratio (PER) of about 22, compared with rival endoscope maker Olympus Corp. at about 27.

''A PER of 22 would be fair if it can indeed hit the reported target. It would mark the average between Olympus and camera and office equipment makers, which have a PER of about 16.'' The Nihon Keizai said group revenue at Pentax should rise about 4 percent to 150 billion yen in 2006/07, with growth driven by its life care division which deals with medical products, reflecting strong demand for a new endoscope system and its budding artificial bone business.

In an interview earlier this week with Reuters, Pentax chief executive Fumio Urano said that losses in the company's camera division were smaller than expected in 2005/06 and would at least turn an operating profit of 500 million yen this financial year.

He said Pentax would likely be able to hit its group sales target of 160 billion yen in 2006/07, up from an estimated 144 billion yen in the past business year, but would probably not be able to achieve its operating profit goal of 10 billion yen.

Urano said Pentax had recently lost share in the U.S.

endoscope market due to the introduction of new products by its rivals, which include Olympus, the world's dominant player with 70 percent of this market, and Fuji Photo Film He also said Pentax, the world's 12th-largest digital camera maker, would aim to ship about 3.0 million digital cameras in 2006/07, up about 8 percent year-on-year. This would include a doubling of digital single-lens reflex (SLR) models, which it is jointly developing with Samsung Techwin Co. Ltd.

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