Summary

• Below expectations. Malaysia Smelting Corporation Bhd’s (MSC) 4QFY23 core net profit came in at RM11.0m (-7% QoQ, -62% YoY), which bring the sum to RM86.7m for FY23. The core earnings came in below expectations, amounting to 85% and 94% of ours and consensus estimates of RM101.6m and RM92.7m, respectively. Key deviations include (i) lower average tin price and (ii) additional costs provisions for staff bonus and retrenchment compensation.

• YTD. For FY23, cumulative core PATMI stood at RM86.7m (-10.0% YoY), in tandem with a drop of 5% in revenue. The softer profit was due to the weaker performance in the tin mining segment which was attributed to lower average tin price of RM118.1k/MT in 2023 as compared to RM136.7k/MT in 2022 offsetting the better performance in the tin smelting segment.

• YoY. In 4Q23, revenue saw an increment of 3% due to higher average tin price of RM116k/MT as compared to RM98.1k for 4Q22. However, core PATMI plunged - 62% due to weaker performance in the tin smelting segment, affected by forex loss and the absence of sale of refined tin from processed tin intermediates and sale of by-products. Nevertheless, tin mining segment saw improvements due to higher average tin price for the quarter and tin production quantity in 4Q23.

• QoQ. Core PATMI dropped -7% from RM11.8m to RM11.0m despite higher revenue of 11% QoQ. This was due to higher foreign exchange loss and additional provisions for staff bonus and retrenchment compensation costs for the tin smelting segment, while the tin mining segment was weaker amid softer average tin price and lower tin production quantity.

• Dividend. MSC has proposed a final single tier dividend of RM0.07. Date of payment will be determined and announced at a later date. Also, MSC announced the adoption of a dividend policy of distributing at least 30% of its net profit going forward.

• Tin price outlook. For the tin price outlook, we gather that tin prices have turned positive, trading above USD27k/MT at this moment for LME 3-month Forward Tin price after hovering sideways during Aug-Dec 2023. We expect the tin prices to have limited downside risk with the support from surging demand in EV and E&E industries as well as the rising adoption of solar energy on the path towards greener environment. The upside could be limited on the back of China’s moderate economic growth and the ongoing conflict in the Middle East region would be a risk factor for the volatility in tin prices.

• MSC’s prospects. Meanwhile, on MSC’s level, we expect the higher efficiency from lower operational and manpower costs with its energy saving initiatives in the Pulau Indah plant. The Butterworth smelting plant will be gradually decommissioned by mid-2024 and the group anticipates cost savings of up to 30%.

Source: Mplus Research - 16 Feb 2024