• 3QFY19 core earnings slumped 16% yoy and 51% qoq mainly due to weaker sales from the Asia and US segments.
• 9MFY19 core earnings fell slightly by 0.6% despite weak performance in 3QFY19. This was largely on the back of higher sales from Asia segment in 1H.
• Overall, 9MFY19 core earnings trailed ours and consensus’ FY19F estimates at 63% and 61%. We cut FY19/20F earnings by 17%/15% on weaker sales volume expected ahead.
• We remain cautious over its business prospects as the US-China trade tension would negatively impact its earnings.

Disappointment in earnings

3QFY19 core earnings fell 16% yoy to RM18.6m in tandem with 10% drop in revenue amidst lower volume loadings from the Asia (c.59% of revenue) and US (c.14% of revenue) (Table 2).

Weaker qoq sales from major market segments

On qoq, core earnings slumped 51% mainly on weaker sales to Asia (- 19%), US (-22%) and Europe (-11%). We believe this was due to adverse effect of the US-China trade tension.

Supported by 1HFY19

9MFY19 core earnings fell slightly 0.6% to RM94.1m from RM99.9m despite huge underperformance in 3QFY19. This was largely on the back of higher sales to Asia in 1H. Overall, 9MFY19 core earnings trailed ours and consensus’ estimates at 63% and 61% respectively.

Dividend declared

A second interim DPS of 17sen (3QFY18: 19sen, YTD: 27sen) was declared. This implies a dividend payout of 233%.

Weaker earnings expected ahead

We cut our FY19/20F core earnings estimates by 17%/15% on weaker sales volume. We remain cautious over its business prospects as we expect the US-China trade tension would be a drag to its overall business.

Non-rated for recommendation and TP

Our coverage on MPI is non-rated after it was excluded from the SC’s list of Shariah-compliant stock in Nov 2018.

Source: BIMB Securities Research - 27 May 2019