Magni-Tech (Magni)’s 4QFY23 headline net profit slipped 3.9% YoY to RM25.8m, mainly due to the decline in sales from its garment segment. After adjusting for non-core items, Magni’s core net profit came in at RM27.1m. Full-year FY23 core net profit of RM99.8m (+11.4% YoY) was in-line with expectations, accounting for 103% of our full-year estimates. We continue to favour Magni given its consistent dividend payout (5-year average of 35.8%), and the growing long-term demand for sportswear due to increasing health awareness among consumers. Our Outperform call on Magni is maintained, with a higher SOTP of RM2.30 as we roll over our valuation base year to CY24F.

• Results review. Magni’s 4QFY23 revenue fell 4.5% YoY to RM246.6m, as both garment (-3.3% YoY) and packaging (-15.3% YoY) segments saw a decline in sales. However, after adjusting for forex gain, Magni’s core net profit grew 11.4% YoY to RM27.1m, which we mainly attribute it to the increase in investment income and operating profit from its packaging segment (+48.8% YoY). The increase was due to lower operating costs. On the other hand, the garment segment saw its operating profit margin decrease by 1.3ppts to 11.7%, likely dragged by lower production efficiency.

• Dividend. Magni declared a fourth interim dividend of 2.5sen, bringing its full-year dividend declared to 9.0 sen, which translates to an attractive dividend yield of 4.9%.

• Outlook. While consumer consumption will likely remain weak due to the inflationary pressures, we are still optimistic on Magni’s long-term growth. This is mainly premised on the change in consumer preference with athleisure being a new fashion trend and increase in health awareness. We understand that Magni is planning to launch new products (eg: synthetic down jackets), which we believe would enable it to fetch higher profit margins given its highly technical manufacturing process.

Source: PublicInvest Research - 27 Jun 2023