4QFY20 core PAT of RM25.2m (QoQ: -1.3%, YoY: +5.0%) brought FY20 figure to RM111.2m (+0.5% YoY), which is in line with ours and consensus expectations, accounting for 101.4% and 104.9% of forecasts, respectively. We lower our FY21/22 earnings forecasts by 26.1%/23.9% to account for expected weaker sales volume going forward. After rolling over our valuation to mid-FY22 and accounting for lower earnings, our TP falls from RM34.00 to RM29.40 based on an unchanged 17x PE multiple. At current price levels, PMM is yielding a decent 4.5% and has a net cash position of RM577.7 (or RM9.50 per share). Maintain HOLD.

In line. 4QFY20 core PAT of RM25.2m (QoQ: -1.3%, YoY: +5.0%) brought FY20 figure to RM111.2m (+0.5% YoY), which is in line with ours and consensus expectations, accounting for 101.4% and 104.9% of forecasts, respectively. FY20 core PAT figure was arrived at after adjusting for derivative gains of RM5.1m.

Dividend. Declared DPS of 183 sen goes ex on 9 Sep (4QFY19: 211 sen). FY20 DPS amounted to 198 sen (FY19: 226 sen), this is above our expected 144.5 sen per share.

QoQ: Sales declined -23.5% due to the impact on operations from MCO since mid March and overall slow-down in domestic sales following festive sales peak in the previous quarter. Core PAT shrunk by a much lesser extent (-1.3%), mainly due to better contribution from associate company of RM4.0m profit (vs. RM2.2m losses in 3QFY20).

YoY: Reduced sales of -9.3% was due to temporary closure of the plant from mid March onwards. Despite this, core PAT rose by 5.0% due to (i) cheaper realised raw material cost (which resulted in better margins for both the Home Appliance and Fan Product divisions); and (ii) higher contribution from associate company as mentioned above.

YTD. Sales decline of -6.7% was due to lower domestic sales (-11.0%) (from sales to property developers and MCO impact) as well as weak sales to the Middle East (- 12.8%) (from trade sanctions in the region). Despite lower sales, core PAT was flat (+0.5%) as PMM were able to benefit from cheaper raw material costs.

Prospects: MCO restrictions on operations in 1QFY21, weaker order volumes from consumers as well as property developers (which purchase fans) are expected to stymie FY21 profitability. While declines in key commodity prices (aluminium, copper etc.) are expected to result in better margins, we reckon it will be insufficient to compensate for weaker sales volumes going forward.

Forecast. Despite the result being inline, we lower FY21/22 earnings forecasts by 26.1%/23.9% to account for expected weaker sales volume going forward.

Maintain HOLD, TP: RM29.40. After rolling over our valuation to mid-FY22 and accounting for lower earnings, our TP falls from RM34.00 to RM29.40 based on an unchanged 17x PE multiple. Despite expected weaker earnings in FY21, we reckon PMM is fairly valued at current price levels, as the share price has declined 22.5% since end-CY19. At current price levels, PMM is yielding a decent 4.5% and has a net cash position of RM577.7m (or RM9.50 per share) as of end-Mar. Maintain HOLD

Source: Hong Leong Investment Bank Research - 6 Jul 2020