PMM’s 1HFY21 recorded core PAT of RM42.1m (-26% YoY). The results came in largely in line making up 46%/45% against ours/consensus forecast. All in all, sales improved on the back of full resumption of factory operation and orders picked up in replenishing depleted stock. While the recovery pace looks promising, we err on the side of caution, owning to the Covid-19 resurgence and reintroduction of CMCO. Reiterate HOLD with unchanged TP of RM28.40 based on unchanged 17x PE multiple on mid-FY22 earnings. Despite the uncertainties, we reckon PMM has the balance sheet strength to weather thru this storm with a net cash position of RM474.1m (or RM7.80 per share).

Broadly in line. PMM reported 2QFY21 results with revenue of RM294m (+91% QoQ, +2% YoY) and core earnings of RM43.8m (against core loss of -RM1.7m 1QFY21, +42% YoY). This brings 1HFY21 performance to core earnings of RM42.1m, decreasing by -26% YoY. Results is broadly within our and consensus expectations, coming in at 46% and 45%, respectively. 1HFY21 one-off adjustments include gain on derivatives (RM1.1m) and forex loss (RM5.8m)

Dividend. DPS of 15 sen was declared, going ex on 22 Dec 2020 (2QFY20: 15 sen). 1H21 DPS amounted to 15 sen (1H20: 15 sen).

QoQ. Top line surged 91% to RM294m on the back of low base effect and recovery in sales with the resumption of business following the relaxation of MCO. Note that PMM’s factory was shut between mid-March and early-May. PMM reported core PAT of RM43.8m (vs core loss -RM1.7m in 1QFY21). The bounce was thanks to (i) the full resumption of factory in fulfilling backlog orders during the closure; and (ii) higher contribution from associate company of RM6m (vs loss of -RM2.9m).

YoY. Revenue ticked up slightly by +2% on the back of higher sales in both domestic and export markets. Segmentally, home appliances reduction (-3%) was offset with increase in fan products (7%) attributable to the restocking of inventory that was affected during the MCO coupled with successful promotional campaign during the Merdeka month. Subsequently, core PAT rose by 42% in tandem with (i) rise in revenue; and (ii) improved EBIT margin by 0.9ppt on the back of lower material cost and OPEX.

YTD. Sales of RM448m, reduced by -23% was mainly attributed to weaker sales in both domestic and export markets brought by the lockdown measures to curb Covid-19 pandemic. As a result, bottom line reduced by -26% to RM42.1m from RM56.7m in SPLY.

Outlook. We expect PMM’s performance to pick up gradually moving ahead on the back of the recovering demand in its products. We foresee that the local market to see an uptick to replenish the depleted stock while orders are continue to pick up from export market. While the recovery pace looks promising, we err on the side of caution, owning to the Covid-19 resurgence and reintroduction of CMCO, which may affect the retail sector again due to expenditure curtailment.

Forecast. Unchanged as 2QFY21 results were largely within estimates.

Maintain HOLD, TP: RM28.40 based on unchanged 17x PE multiple on mid-FY22 earnings. Despite the uncertainties, we reckon PMM has the balance sheet strength to weather thru this storm with a net cash position of RM474.1m (or RM7.80 per share) as at end of Sept.

Source: Hong Leong Investment Bank Research - 7 Dec 2020