MSM Malaysia: Sugar tax dampens prospects Sell

Maintain SELL on MSM Malaysia with a lower fair value of RM2.96/share. Our fair value for MSM is based on an FY19F PE of 25x. We have reduced MSM’s FY19F net profit by 9.3% to account for a lower sales volume of 3.6% vs. 6% previously. We believe that MSM’s sales volume would be affected by the excise duty on sugary drinks.

Malaysia will be imposing an excise tax of RM0.40/litre on 1 April 2019 on two categories of drinks. The two categories are: (i) non-alcoholic beverage containing added sugar of more than 5 grams per 100ml; and (ii) fruit or vegetable juices containing added sugar of more than 12 gram per 100ml. The excise duty on drinks is negative for MSM. Consumer companies may change the formulation of their beverage products to avoid the sugar tax.

Others:

Unisem: 4Q to see flat growth Accept Offer

QUICK TAKES

N2N Connect: Proposes 1-for-4 bonus issue Buy

Automobile: Covering blind spots in fuel subsidy Neutral

Plantation Sector: News flow for week 29 Oct – 2 Nov Neutral

NEWS HIGHLIGHTS

Property Sector: Innovative financing scheme to spur home ownership

MRCB: RM1.3b takeover of EDL a boon

Jaya Tiasa: Scales down wood processing operations

Oil & Gas Sector: Oil rally faces tidal wave of supply

Source: AmInvest Research - 5 Nov 2018