Investment Highlights

• Maintain SELL on MSM Malaysia with a fair value of RM1.55/share, which is based on an FY19F PE of 25x.

• We visited MSM’s sugar refinery in Tanjung Langsat, Johor recently. The processing plant is modern, clean and spacious. The land area is large, at more than 50 acres in total. MSM has only used 40% of the land area for its operations.

• The sugar refinery was designed by an individual from Thailand. The machineries and equipment were imported from Thailand, Germany and Japan.

• MSM’s sugar refinery in Johor has an installed production capacity of one million tonnes per year. This is almost as large as the group’s sugar refinery in Prai, Penang, which has an installed capacity of 1.2mil tonnes per year.

• Although MSM’s operations were not affected by the toxic waste crisis at Sungai Kim Kim, the group has employees staying in the Red Zone. Hence, MSM has relocated the employees and their families to hotels in Johor Bahru. About 74 out of the total 238 staff were relocated.

• MSM’s sugar refinery in Tanjung Langsat is located next to the sea. The area is classified as Green Zone. The sugar refinery is more than 10km away from the Red Zone.

• MSM’s jetty at Tanjung Langsat has a depth of 11 metres. This allows the sugar refinery to receive raw sugar from vessels with a capacity of 44,000 tonnes each. Raw sugar from the jetty are transported to the warehouse by lorries. MSM imports its raw sugar from Thailand, Brazil and Australia.

• The warehouse has the capacity of storing 300,000 tonnes of raw sugar per year. For refined sugar, the warehouse’s capacity is 7,000 to 8,000 tonnes.

• MSM’s sugar refinery in Johor is expected to produce refined sugar mainly for the domestic market. The sugar refinery is expected to produce about 300,000 tonnes of refined sugar in FY19F.

Source: AmInvest Research - 20 Mar 2019