Company background

 

The MSC Group is currently one of the world's leading integrated producers of tin metal and tin based products and a global leader in custom tin smelting since 1887. In 2015, the Group maintaining its position as the second largest supplier of tin metal in the world. MSC is listed both on the Main Market of Bursa Malaysia since 15 December 1994 and the Main Board of Singapore Exchange (SGX-ST) since 27 January 2011, and is a 54.8% subsidiary of The Straits Trading Company Limited of Singapore.

In the mid 90's the Group started a tin marketing and trading arm under the smelting division. The downstream unit provides the Group with hedging, pricing and marketing linkages to the Kuala Lumpur Tin Market / London Metal Exchange markets as well as the end-user markets worldwide. MSC Straits refined tin brand which is registered at LME and KLTM is accepted worldwide and has purity ranging from the standard Grade A (99.85% Sn) to the premium grade electrolytic tin (99.99% Sn).

 

In November 2004, MSC expanded upstream in mining through the acquisition of Rahman Hydraulic Tin Sdn. Bhd. (RHT), Malaysia's long established and largest operating open-pit hard rock tin mine. Since the takeover, extensive exploration works and improvements of milling / concentrator circuit and recovery operations have been undertaken and today RHT is a sustainable and significant tin producer in Malaysia.

 

The Group's 40% equity interest in Redring Solder (M) Sdn. Bhd. provides vertical integration to the its tin smelting business and an entry into a profitable downstream solder manufacturing business with significant growth potential. Redring Solder's principal activities are the manufacture and sale of solder products for jointing and semi-conductor applications in the electrical and electronics industries.

 

 

Total EPS for the past 5 years:

 

2011 - 62.6sen

 

(RM2mil) - Impairment provision for investment in Guilin Hinwei Tin Co. Ltd.

(RM6.4mil) - Impairment provision for investment in Asian Mineral Resources Limited

(RM0.3mil) - Loss on disposal group classified as held for sale

(RM16.6mil) - Impairment provision for investment in TMR Ltd

(RM18.2mil) - Provision for mine rehabilitation

RM8mil - Investment income 

 

(Total extraordinary item = (RM35.5mil) or (EPS35.5sen))

 

EPS without extraordinary item = 98.1sen

 

 

 

2012 - (61sen)

 

(RM2.1mil) - Provision for investment in Guilin Hinwei Tin Co. Ltd.

(RM8.6mil) - Impairment provision for investment in TMR Ltd

(RM6.6mil) - Impairment provision for investment in KM Reosurces, Inc

(RM7mil) - Deferred exploration and evaluation expenditure written-off

(RM1mil) - Loss arising from cessation of significant influence in a former associate

RM4mil - Investment income

(RM3.2mil) - Provision for mine rehabilitation 

 

(Total extraordinary item = (RM24.5mil) or (EPS24.5sen))

 

EPS without extraordinary item = (36.5sen)

 

 

2013 - (7.40sen)

 

RM6mil - Reversal of impairment for investment in KM Resources, Inc

(RM9.1mil) - Impairment for investment in TMR Ltd

(RM1.9mil) - Impairment for investment in Asian Mineral Resources Limited

(RM1.9mil) - Impairment for investment in Alphamin Resources Corp

RM2.8mil - Investment income

 

(Total extraordinary item = (RM4.1mil) or (EPS4.1sen))

 

EPS without extraordinary item = (3.3sen)

 

 

2014 - (9.9sen)

 

(RM4.2mil) - Impairment of investment in KM Resources, Inc

(RM25.3mil) - Loss on disposal of disposal group classified as held for sale

(RM3.5mil) - Loss on disposal of a subsidiary

(RM9.6mil) - Provision for financial guarantee

RM2.7mil - Investment income

 

(Total extraordinary item = (RM39.9mil) or (EPS39.9sen))

EPS without extraordinary item = 30.0sen

 

2015 - 13sen

 

(RM4.2mil) - Impairment of investment in KM Resources, Inc

RM2.5mil - Investment income

(Total extraordinary item = (RM1.7mil) or (EPS1.7sen))

 

EPS without extraordinary item = 14.7sen

 

 

2016 - 31.9sen (3 quarters)

 

 

RM2.1mil - Investment income

(RM30.5mil) - Share of losses from KM Resources

(Total extraordinary item = (RM28.4mil) or (EPS28.4sen))

 

EPS without extraordinary item = 60.3sen

 

Current PE ratio using EPS without 

extraordinary item: 6.47 (RM3.90)

 

Net assets: RM2.7098

I am here to ANSWER a simple question.

Why MSC?

 

1) Increased in tin metal price per tonne by

50% since January 2016

 

2) Tin ore reserves of Rahman Hydraulic 

Tin Sdn Bhd (subsidiary of MSC) can last 

for at least 15years

 

3) Improved in fundemental of the company

by reducing debt from net borrowing

position of RM572mil (31/12/2010) to

RM162mil (30/9/2016)

 

4) The company's stays profitable since 

2014

 

5) Others

 

 

 

 

1) Increased in tin price per tonne by 50%

since January 2016

Sources: London Metal Exchange

Refer to the graph above, the tin price have been significant increased by 50% since Jan 2016 from USD14,000 per tonnes to near to USD21,500 as per today. As 2nd largest suppliers in the world, the spike in tin price will bring significant improvement in MSC's profit in the coming quarters.

 

2) Tin ore reserves of Rahman Hydraulic

Tin Sdn Bhd (subsidiary of MSC) can last

for at least 15 years

 

Sources: Annual report 2015

 

As per above, the production of tin-in-concentrates for 2015 is 2,196 tonnes while the total contained tin for Rahman Hydraulic Tin Sdn Bhd is 33,756 tonnes.

Total useful life - 33,756 tonnes / 2,196 tonnes = 15.31 years

In 2015, the mine maintained its position as the largest producer of tin-in-concentrade in Malaysia, producing about 57% of the country's tin production.

3) Improved in fundemental of the company

by reducing debt from net borrowing

position of RM572mil (31/12/2010) to

RM162mil (30/9/2016)

As per graph above, it shown that the net borrowing have been significant decreased since 31/12/2010. It have been decreased from RM572million to RM162million. The company did not declared dividend since 2012. Hopeful with the reduction in net borrowing position, the company will start paying dividend again this year.

 

4) The company's stays profitable since

2014

 

 

 

 

Trade at your own risk!!! Do research before any investment decision!!!

Merry Christmas and happy new year :-)