MPI’s 1QFY15  (Jun)  core earnings  of MYR17.4m (+4.0% YoY)  were  well within  both our  and consensus  expectations  at  22.7% and 21.7% of the full-year forecasts respectively. Maintain BUY with our TP unchanged at MYR6.34 (15.8x 2015 P/E,  23.1% upside).  Management declared its first interim DPS of 7.0 sen, which translates into  a decent  payout ratio of 66.7% for the quarter. We make no changes to our forecasts.

Largely  in  line.  Malaysian  Pacific  Industries’  (MPI)  1QFY15  (Jun) revenue  reached  MYR327.7m  (+1.8%  QoQ,  -0.9%  YoY),  as  higher contribution from its segmental Asia (+12.9%  QoQ,  +19.8% YoY)  sales was  partly offset by weaker showing from its US  (-24.5% QoQ,  -32.7% YoY) and Europe (+9.0% QoQ,  -1.5% YoY)  divisions.  We estimate that 1QFY15  sales would have increased by a larger quantum at 3-4% QoQand  1-2% YoY in USD,  as the  USD averaged at MYR3.19 (vs  MYR3.23 in 4QFY14  and  MYR3.24 in 1QFY15).  All in, core earnings  closed 4.0% higher YoY at MYR17.4m but shed 19.2% QoQ due to higher opex and a higher effective tax rate during the quarter. 

Dividend  declared.  Management  declared  its  first  interim  DPS  of  7.0 sen  (5.0 sen  in  1QFY14).  This  translates  into a  decent  payout  ratio  of 66.7% for the quarter (53.0% in 1QFY14).  

Forecasts and risks. With the results largely in line, we make no major changes  to our core assumptions.  Key  risks  to our  earnings  estimates include:  i)  strengthening  of  the  MYR  against  the  USD,  ii)  higher  raw material costs, and iii) a potential slowdown in the semiconductor market should consumer spending tighten.

Maintain BUY. We continue to advocate investors to accumulate on the stock  on  improved  earnings visibility  going  into 2015. Maintain BUY with our  TP  unchanged  at  MYR6.34  (15.8x  2015  P/E,  23.1%  upside).  Our valuation methodology is pegged at a 10% discount to our target multiple for  its  peers  in  Inari  Amertron  (INRI  MK,  BUY,  TP:  MYR3.82)  and Globetronics Technology (GTB MK, NEUTRAL, TP: MYR4.75), which we deem  justified  taking  into  account  the  duo’s  relatively  less  volatile profitability  track  record  as  well  as  larger  presence  within  the  betteryielding smart devices component segment.

Source: RHB