We are adding 6000 shares of Magni-Tech Industries (MAGNI) into our THEMATIC portfolio and 5000 shares each into both our GROWTH and DIVIDEND YIELD portfolios at RM3.17/share. MAGNI is primarily engaged in the manufacturing of garments for export and a wide range of flexible plastic packaging, corrugated packaging products and display boxes. The garment segment counted for c. 82% of the group’s total revenue in FY14 with the balance came from the packaging business.

MAGNI has recorded an uninterrupted 9-year earnings uptrend since FY05. The group’s revenue has advanced to RM652m in FY14 (or a CAGR of 24% since FY05) while its net profit surged to RM42m (or CAGR of 53%) as a result of margins expansion. Meanwhile, the group also recorded a strong net cash of RM71m (or implied a 65 sen cash per share) with zero gearing while its retained earnings ballooned to RM126m (from RM98m a year ago) as at end-FY14.

The group is currently trading at an undemanding historical PER of 8.2x. We fairly value MAGNI at RM3.82, based on a conservative targeted FY15 PER of 10.1x (representing the highest PER since FY09 or post the financial crisis). Note that, our targeted PER is still lower than the FBM Small Cap Index’s forward PER of 12.5x.

Source: Kenanga