Magni-Tech (Magni)’s 4QFY24 core net profit grew by 17.4% to RM31.8m, bringing its full-year FY24 core net profit to RM121m. The better performance was mainly lifted by stronger contribution from its garment segment. Earnings were within expectations, accounting for 103% of our estimates. We tweak our earnings forecast upwards by an average of 2%, on bookkeeping changes. We continue to favour Magni, as we foresee robust athleisure sales given consumers’ focus on sports, comfort and health. We reiterate our Outperform call on Magni, with a higher TP of RM3.26 as we roll-over our SOP valuation base year to CY25 and updated our SOP valuation to reflect on Magni’s cash pile of RM538.7m, which translates to net cash per share of RM1.24.

• 4QFY24 revenue increased by 36.6% YoY to RM336.9m, underpinned by stronger sales from the garment segment as the segment saw a 41.6% YoY growth. This has helped to offset the weaker performance by the packaging segment, which saw a decline of 15% YoY, dragged by lower sales orders.

• 4QFY24 core net profit rose by 17.4% YoY to RM31.8m, thanks to greater economies of scale, in-line with the increase in garment orders. As a result, Magni’s garment segment operating profit margin expanded by 0.5 ppts to 12.2%.

• Dividend. Magni declared a higher fourth interim dividend of 3.3 sen (4QFY23: 2.5 sen), bringing the YTD dividend declared to 11.8sen. This translates to a payout ratio of 39.8% or an attractive dividend yield of 4.9%. We raise our dividend payout ratio forecast to 40% (from 35%) given the group’s strong balance sheet position with no borrowings.

• Outlook. While the adjustment in Vietnam’s minimum wage by an average of 6% will increase Magni’s labour cost, we believe this it will be offset by better production efficiency given the robust demand for sportswear. This is mainly driven by the tailwinds in the athleisure industry as consumers are more interested in sports to maintain a healthy lifestyle, further supported by the upcoming Paris Olympics. In addition, normalized inventory levels should help to boost sales orders.

Source: PublicInvest Research - 26 Jun 2024