Highlights

Magni-Tech Industries Berhad - Earnings Within Expectations

Date: 24/06/2019

Source  :  PUBLIC BANK
Stock  :  MAGNI       Price Target  :  6.60      |      Price Call  :  BUY
        Last Price  :  2.31      |      Upside/Downside  :  +4.29 (185.71%)
 


Magni-Tech Industries (Magni-Tech)’s recorded better 4QFY19 revenue of RM234.6m (+6.4% YoY). Despite the higher revenue, core net profit came in lower at RM22.8m (-4.7%), after stripping off foreign exchange losses amounting to RM1m due to the higher tax expense recorded for the quarter. Full year earnings were in-line with our expectations, making up 97% of our estimates. Magni-Tech proposed a final dividend of 5 sen per share for 4QFY19, bringing total dividend declared for FY19 to 23 sen (FY18: 20 sen), representing a total payout of 36.5%. We maintain our Outperform call on Magni-Tech with a higher SOP-based TP of RM6.60 as we roll over our valuation base year to CY20F. We continue to like Magni-Tech for its solid fundamentals (net cash position of RM211.4m or RM1.29/share as at 30th April 2019), attractive dividend yield (FY20F: 4.2%) and its steady earnings growth.

  • 4QFY19 Revenue (+6.4% YoY). Garment segment, the largest revenue contributor for Magni-Tech, recorded higher revenue of 7.4% YoY mainly due to higher sales orders received while packaging segment’s revenue slipped by 1.4% YoY as sales orders declined.
  • 4QFY19 Profit Before Tax (+18.0% YoY). Garment’s PBT grew by 17.0% YoY, in tandem with the higher sales orders and supported by lower foreign exchange loss (4QFY19: RM2.8m vs 4QFY18: RM4.3m). Meanwhile, packaging division’s PBT jumped by 35.6% mainly attributable to better gross margin, and higher interest and dividend income.
  • Expected to benefit from US-China trade war. Moving forward, we expect a better performance from Magni-Tech in FY20F as the continuing trade dispute is expected to benefit Magni-Tech due to major US customers shifting orders away from China to other manufacturers around the region.

Source: PublicInvest Research - 24 Jun 2019

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