PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 23 Jan 2020, 9:38 AM


Magni-Tech Industries Berhad - Stronger Contribution From Garments

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Magni-Tech (Magni) posted a 17.8% YoY revenue growth to RM301.3m for 2QFY20, while its net profit jumped by 28.7% YoY to RM29.9m, mainly attributable to promising sales contributions from the garment segment and lower operating costs incurred. After stripping-out foreign exchange gains of RM2.7m, Magni’s cumulative 1HFY20 core net profit is at RM57.6m, broadly in-line with our expectations at 46.4% of our full year estimates. We leave our earnings unchanged as 3Q is a seasonally stronger one. Moving forward, we believe the higher capacity from its 2-phase expansion plan will enable Magni to fulfill more orders from its single major customer. We reiterate our Outperform call on Magni with an unchanged SOP-based TP of RM2.91. Separately, Magni declared a higher DPS of 2.5 sen (2QFY19: 1.875 sen).

  • 2QFY20 Revenue (+17.8% YoY). Garment segment revenue, Magni’s largest contributor, jumped by 21.9% YoY to RM277.2m due to higher sales orders received, a direct consequence of trade diversions from US customers. On the flip side, packaging segment revenue fell by 14.7% to RM24.1m as sales orders fell.
  • 2QFY20 Profit Before Tax (+25.3% YoY). Garment-based PBT grew by 27.9% YoY, mainly boosted by better operational efficiencies at its manufacturing plants in Vietnam, higher foreign exchange gains (2QFY20: RM2.6m vs 2QFY19: RM2m) and higher investment-related income. Packaging division’s PBT was lower in tandem with the lower sales orders received meanwhile.
  • Going forward. Magni will be one of the major beneficiaries from the US China trade dispute as its major US customer diverts its orders away from China to Vietnam and other garment manufacturers in the ASEAN region. Furthermore, 2020 will be a major sporting year with the UEFA European Championships and Tokyo Olympics expected to fuel the growing demand for sportswear. We are optimistic that Magni will be able to ride this oncoming wave.

Source: PublicInvest Research - 11 Dec 2019

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