• Maintain BUY (TP: RM3.04). MSM’s FY23 LAT of RM49.9mn (72.1% YoY) made up 87.6% of our estimate, hence above ours but below consensus expectation. Concurrently, revenue rose by 20.5% YoY reaching to RM3,091.2mn supported by the hike in industry sales volume and higher blended average selling price (ASP). MSM’s 4QFY23, revenue and net profit both surged by +40.2% YoY and 197.1% YoY respectively, driven by the government incentive received alongside the improved overall utilisation factor (UF). To recap, MSM received RM1,000/MT for 24,000MT/month of a special incentive for November and December 2023 for Coarse Grain Sugar (CGS) of 1kg/2kg and Fine Grain Sugar (FGS) of 1kg, translating to an additional of RM24mn to the topline. Progressively, margin is expected to further increase in FY24 due to higher export sales volume and MSM Johor’s plan in ramping up their UF. We maintain a BUY on MSM, with an unchanged TP of RM3.04 based on FY24 EPS of 26sen that is pegged at global average PER of 11.7x.

• Key highlights. On QoQ basis, its bottomline returned to black with profit of RM42.9mn from a staggering loss of RM36.1mn, all thanks to the incentive received as well higher ASP. We do note that any excess demand upon the minimum quota of 24,000MT/month, will be fulfilled by Gula Super which being sold at RM4.60/kg. Moreover, the high industry sales volume in 2HFY23 supported the increase in revenue.

• Earnings Revision. No changes pending management update.

• Outlook. As MSM made profit in 4QFY23 after suffering losses each quarter since 4QFY21, we anticipate MSM to continue being in black as it set to boost export sales volume to APAC countries leveraging on the global sugar deficit due to the climate phenomenon, El Niño and the food crisis happening in Africa. Simultaneously, to facilitate the rising demand for exports, MSM Johor is expanding its raw sugar orders and constructing a third boiler as a backup to ensure uninterrupted production.

Source: BIMB Securities Research - 23 Feb 2024