MAGNI (7087) is a well known as a “Nike proxy”, maybe not exactly correct, but still MAGNI should, in theory, somehow to follow trends suggested by its largest customer. NIKE posted really nice profits, maybe early reflection of post-covid return to normal and for many catch-up their long missed exercise.

Chart of MAGNI

Nike reported almost double increase in revenue compare to prior year and 21% increase compared to previous QR, gross margin is at a very nice level of 45.8%. It is a significant improvement and maybe suggests really the “fitness recovery trend” is already in play, as US vaccination drive is a way ahead from our pace. Another factor is Olympics coming and as in the past it also resulted in a more healthy lifestyle and better sales for Nike. All this should reflect in increasing MAGNI revenue.

Chart of NIKE

But when we talk about MAGNI its not all about Nike, it is far from that in fact and MAGNI by itself plans to grow and expand in the future, perhaps diversify more and bring a more value for shareholders. Right now it is already a defensive counter and pays a solid dividend. In view of all above, I am expecting a good growth within the next 1-2 years and hopefully even for longer.

Price 28. June 2021: 2.35

Last 4QR EPS: 29.33 sen

P/E Ratio: 8

Dividend Yield: 4.72%

It seems to me, it is already undervalued by some 20% even without considering a future growth, which we know will come just because of Nike increased sales if nothing else. Due to its relatively defensive nature (thanks to Nike) and a good DY I think for the fair value can use higher target P/E of 12, but even with simple P/E of 10, it still suggests, the fair value should be much higher, maybe RM 3.

Now how with the expected growth? For sure there will be some, everyone knows recovery will increase sales for Nike – and it is already happening now. In my opinion there is easily possibility to grow earnings by 50% over the next year thanks to the “recovery” and even continue for another one. It gives as a PEG ratio of 0.4 for 20% growth only already.

Read about PEG Ratio HERE.

Read about TOMEI correction HERE.

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