MPI’s 9MFY15 (Jun) core earnings of MYR69.2m (+60.1% YoY) were in line, at 76.4%/77.5% of our/consensus full-year estimates. Maintain BUY, with our TP unchanged at MYR7.69 (15x 2016 P/E, 17.3% upside). Management declared a second interim DPS of 13.0 sen. MPI’s YTD DPSnow stands at 20.0 sen (vs 15.0 sen in 9MFY14).
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Results review. Malaysian Pacific Industries’ (MPI) 9MFY15 revenue reached MYR1.02bn (+4.9% YoY), boosted by improved utilisation and a favourable forex environment as the USD averaged MYR3.39 in 9MFY15 vs MYR3.25 in 9MFY14. Its EBITDA improved 18.4% YoY as margin expanded 280bps to 24.9%. All in, core earnings grew 60.1% YoY to MYR69.2m, coming largely within expectations. The company’s 3QFY15 numbers were generally higher YoY (on improved customers’ order flow) as well as QoQ, lifted by the strengthening of USD against MYR, which averaged at an estimated MYR3.55 during the quarter vis-à vis MYR3.40 in 2QFY15.
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Dividend surprise. Management declared a second interim DPS of 13.0 sen. Its YTD DPS now stands at a hefty 20.0 sen (vs 15.0 sen in 9MFY14), which implies a payout ratio of 51.3% vs 77.9% previously.This trumps our previous full year DPS forecast of 17.5 sen. We do not discount the possibility of a potential special dividend come 4QFY15, as we take into account its healthy net cash of MYR63.9m (or MYR0.30 per share) as of Mar 2015.
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Forecasts and risks. With the results coming in largely in line, we make no major changes to our FY15-17 forecasts. 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.
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Maintain BUY. We continue to advocate investors to accumulate the stock on MPI’s improving earnings visibility for the rest of 2015 and given its undemanding valuation vis-a-vis its closest peer, Unisem (UNI MK, NEUTRAL, TP MYR2.42). Maintain BUY, with our TP unchanged at MYR7.69 based on 15x 2016 P/E.
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