• Upgrade to BUY (TP of RM3.18). MSM has sustained its profit in 1QFY24 with PAT of RM41.7mn. We deemed this as within our expectation as it is made up of 19.8% and 18% of our and consensus forecast respectively. Prospectively, we anticipate higher export sales volume coming from APAC countries in tandem with higher utilisation factor (UF) in Johor. Following recent price weakness, we upgrade MSM to a BUY (from a HOLD) with an unchanged TP of RM3.18. This is based on FY24 EPS of 30sen that is pegged at global average PER of 10.6x.

• Key highlights. In 1QFY24, MSM’s revenue surged by 54.1% YoY to RM906.6mn due to higher overall sales volume of 254k MT (1Q23: 208k MT) and higher average selling price thanks to the government incentive received. Both wholesale and export segments registered higher sales volume at 98k (1Q23: 90k MT) and 50k MT (1Q23: 21k MT) respectively. On QoQ basis, net profit declined by 2.7% because of the lower sales volume in the export segment (4Q23: 70kMT vs 1Q24: 50k MT) along with higher effective tax rate.

• Earnings Revision. No changes.

• Outlook. We expect MSM to achieve stronger profit in upcoming quarters in anticipation of higher UF in MSM Johor. The plant is targeted to be breakeven at 40% UF in 2HFY24 while the export sales volume is anticipated to increase to 300kMT in FY24. At present, MSM has commit to export 200kMT of sugar to various countries while the remaining volume will be exported to Vietnam as MSM anticipates the anti-dumping tax policy to be loosened up. MSM Johor is also planning to produce brown sugar which is beneficial to attract demand from Africa.

Source: BIMB Securities Research - 24 May 2024