• We attended MSM Johor’s Open Day recently and remain to have a positive outlook on MSM due to its plan to ramp up MSM Johor’s utilisation factor (UF) by boosting its export volume.

• The company plans to install the third boiler at MSM Johor (MSMJ) to ensure reliability of the plant while it pursues more export volume. Besides that, it is also ramping up the orders for raw sugar in order to meet rising export demand. In total, it expects to raise its export by 33%- 70 to 300-400k MT in 2024.

• Overall, the company expects to boost MSMJ UF to 50-60% by end FY24. We are optimistic that this will result in higher blended UF of 67% in FY24 from 55% in 9M23.

• We uphold our BUY recommendation with an unchanged TP of RM3.04. Our TP is based on FY24F EPS of 26sen that is pegged at global average PER of 11.7x.

Boosting UF at MSM Johor

We continue our positive outlook on MSM as it set to boost its UF at MSM Johor by boosting its export volume. Management guided that it targets to raise MSM Johor UF to 50%-60% by the end of FY24 from current 33%-34%. Overall, we estimate this will boost MSM’s blended UF to 67% (9M23: 55%). We also gathered that another boiler (Boiler 3) is underway which is expected to be completed in 2025. This will be used as a spare given that the plant requires 2 operating boilers to operate at design capacity of 1mn metric tonne per annum (MTPA). Besides that, the company is also ramping up the orders for raw sugar in anticipation of rising demand from export market. In total, MSM Johor expects to receive the delivery of 9 vessels of 42-47k MT raw sugar each in 2024 as compared to 5 vessels in 2023.

Export Volume Set to Increase in 2024

Moving forward, the company is looking to increase its exports to countries such as Singapore, China, and Indonesia. It also plans to penetrate the South Africa market leveraging on the food crisis in the region. Overall, MSM targets to increase its export volume by 33-70% to 300k-400k MT in FY24 (FY22: 225k MT). To recap, the export volume has been declining since 2020 partly due to the after-effect of supply chain disruption as well as the imposition of antidumping tax on sugar by Vietnam which is a key export market for MSM.

Risk to Our Forecast

We maintain our earnings forecast at this juncture despite higher hedged raw sugar price poses some downside risk to it. Currently, it has hedged its raw sugar (NY11) up until April 2024 at USD0.23-0.24/lbs. This is higher than prevailing market price of USD0.22/lbs. However, we anticipate that NY11 to stay at elevated level due to the declining global sugar production and the global sugar deficit forecast in 2023/24 as emphasised by International Sugar Organisation (ISO).

Maintain BUY call with TP of RM3.04

We maintain our BUY recommendation on MSM with unchanged TP of RM3.04 based on FY24F EPS of 26sen that is pegged at global average PER of 11.7x.

Source: BIMB Securities Research - 8 Feb 2024