Summary

• Results came in within expectations. For 3QFY24, ASIAFLE recorded core earnings of RM13.8m (+100.4% QoQ, +115.2% YoY), translating to a sum of RM36.6m (+64.4% YoY) for 9MFY24. The core PATMI came in within expectations, accounting to 72.3% of our forecast (consensus forecast stood at RM39.4m). A second interim dividend of 3.5 sen per share was declared (ex-date: 30-Apr-2024).

• QoQ. Despite a drop of 14.6% in revenue, the core PATMI jumped 100.8% on the back of better operating profit from both the filing (+14.1%) and consumer ware (+17.3%) divisions. Meanwhile, the share of profit from the associate turned positive for the quarter at RM1.7m vs. a loss of RM0.5m in 2QFY24. Besides, favourable foreign exchange gains lifted the core PATMI as well.

• YoY. Despite the drop in revenue by -9.5% due to weaker demand for both the filing and consumer ware divisions, core PATMI soared 115.2%, thanks to favourable exchange gains of RM3.2m (3Q23: RM2.1m). Moreover, the share of losses of the associate stood at -RM3.6m in 3Q23 has turned positive for the quarter to RM1.7m.

• YTD. The group’s revenue dropped 7.2% YoY to RM222.2m amid the general weaker consumer sentiment, resulted in an overall softer demand for its consumer products. However, core PATMI increased 64.4% YoY and the vast improvement was due to favourable exchange factor and increased in operation efficiency.

• Outlook. In view of the softer recovery from China amid the struggling property sector, weaker consumption activities as well as slowing exports may have negative impacts on the overall business sentiment. However, ASIAFLE will embark and intensify the sales penetration on various digital platforms and focus on improving productivity and efficiency in protecting its operating margin.

Valuation & Recommendation

• Forecast. Maintained.

• Maintained BUY with TP of RM2.60. We maintained the Buy recommendation on ASIAFLE, with a target price of RM2.60. The target price derived by ascribing a P/E of 10.0x to FY24f EPS of 26.0 sen. Also, we like the group’s net cash position of RM303.2m (70.9% of the current market cap of RM427.7m) as at 9MFY24. We do not rule out windfall dividends given the strong cash position in ASIAFLE.

• Recommendation risks include the (i) supply chain disruptions, which may translate to higher operating costs and (ii) forex risks as its export proceeds are mainly denominated in GBP and EUR, while import is predominantly priced in USD. Any depreciation of GBP/MYR or EUR/MYR could exert pressure to the group’s margin.

Source: Mplus Research - 1 Mar 2024