PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 25 Jan 2021, 1:29 PM


Magni-tech Industries Berhad - Dragged By Lower Garment Sales

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Magni-Tech’s (Magni) 2QFY21 revenue declined by 10.7% YoY to RM269.1m, while its net profit fell further by 30% YoY. The weaker set of results was mainly dragged by lower sales orders received from its single largest customer. After adjusting for exceptional items and forex loss, Magni’s 1HFY21 core net profit came in at RM49m. Results were below expectations, accounting for 40.7% of our earnings estimates. The discrepancy was largely due to the lower-than-expected sales from its Garment segment. As such, we tweak our FY21F earnings estimates downwards by 7% to account for lower sales, which we believe is affected by weaker consumer sentiments. However, we maintain our forecasts for FY22-23F as we anticipate mega sporting events to drive sales. Our SOP-based TP is reduced slightly to RM2.82 (from RM2.85). We maintain our Outperform call. Magni declared a second tier interim dividend of 1.8sen, bringing the YTD dividend declared to 3.8sen. For full-year FY21F, we are projecting a dividend yield of 3.5%.

  • 2QFY21 Revenue (-10.7% YoY, -7.8% QoQ). Garment segment revenue fell by 11.8% YoY to RM244.6m due to reduced consumer spending on weaker global sportswear demand. On the other hand, packaging segment revenue grew by 1.5% YoY to RM24.5m, underpinned by higher orders of flexible packaging products.
  • 2QFY21 Pretax Profit (-28.9% YoY, -23.0% QoQ). In line with the decline garment orders, PBT for the segment declined by 32.6% YoY to RM25m. In addition, the garment segment was impacted by the higher foreign exchange loss of RM4.8m (against a foreign exchange gain of RM2.6m in 2QFY20). As for the packaging segment, PBT soared by 62.7% due to lower raw material costs of flexible packaging and lower administration costs.
  • Future outlook. Mega sporting events like UEFA EURO 2020 and Tokyo Olympics 2020 which are scheduled to be held next year should augur well for global sportswear demand. As such, we remain positive on Magni’s long-term prospects as the group should benefit from the revival of sporting events. While capacity expansion plans is largely on hold for the time being, we think Magni will continue to streamline its operations to boost productivity. Given Magni’s strong net cash position of RM337m with zero borrowings, we do not rule out the possibility of M&A exercises in the future to diversity its product offerings.

Source: PublicInvest Research - 4 Dec 2020

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