We are upgrading MSM Malaysia to HOLD from SELL as its share price is below our fair value of RM1.02/share. Our new fair value of RM1.02/share (vs. RM1.20/share previously) is based on a P/NTA of 0.6x compared with 0.7x originally. The lower P/NTA accounts for the risk of further asset impairments for MSM. We forecast MSM’s NTA/share to be RM1.69 as at end-FY19E.
MSM’s performance in 9MFY19 was below consensus estimates and our expectations. The group reported a bigger net loss of RM185.0mil in 3QFY19 vs. RM65.4mil in 2QFY19 due to a RM137.3mil impairment on property, plant and equipment. Excluding the impairment, MSM’s net loss would have been RM47.8mil in 3QFY19.
We have increased our forecast of MSM’s net loss for FY19E to RM132mil from RM120mil as operating expenses were higher than expected.
MSM’s performance was poor in 9MFY19 as the group was hit by a 9.2% YoY fall in domestic selling prices and a 1.1% decline in sales volume. Refined sugar prices fell due to competition from imported sugar and Tradewinds Group’s Central Sugar.
In addition, MSM was affected by higher interest and depreciation expenses attributed to the new sugar refinery in Tanjung Langsat, Johor. Interest expense surged by 303.6 YoY in 9MFY19 while depreciation expense increased by 281.3%.
MSM’s sales volume (ex-molasses) slid by 1.1% YoY to 698.000 tonnes in 9MFY19. We believe that the fall in demand was due to customers switching to imported sugar products, which are cheaper. Also, we think that industry demand for sugar might have declined as the sugar tax on packaged drinks took effect in Malaysia on 1 July 2019.
Breaking it down, sales volume of sugar to the industrial segment slipped by 2.1% YoY in 9MFY19 while sales volume of sugar to the retail segment rose by 6.7%. Export sales dived by 28.6% YoY to 60,000 tonnes in 9MFY19.
On a quarterly basis however, sales volume of sugar products (ex-molasses) improved by 13.5% in 3QFY19 as there was less competition from imported sugar products. We understand that most of the quota of sugar imports under the approved permit system had already been used up.
MSM Malaysia Holdings Bhd said higher operating costs and weaker price power for its sugar products contributed to losses in the third quarter ended Sept 30, 2019 (3Q19).
The company recorded a net loss of RM185.1 million or 26.34 sen loss per share for the 3Q19 versus a net profit of RM15.88 million or earnings per share of 2.26 sen recorded in the same period a year ago.
The country’s leading refined sugar producer and one of the biggest sugar refiners in Asia was hit by higher refining and finance cost including a RM137.35 million provision for plant and machinery.
KUCHING (Dec 9): The liberalisation policy on sugar supply in Sarawak will not result in an immediate effect to the price of the commodity but will definitely benefit consumers in the long term, Domestic Trade and Consumer Affairs Deputy Minister Chong Chieng Jen said today.
He said the policy, however, broke up the monopolies held by certain companies which dictated the supply and price of sugar in the state in the past, thus lowering the costs of business and reducing inflation in the long run.
“The main difference between the present PH government and the past BN (Barisan Nasional) government is that the BN government creates monopolies, thereby increases the cost of business which ultimately leads to prices of goods increases,” he said in a statement.
The statement came following the revelation of 11 companies which had been given the permit to import sugar to the state recently through the liberalisation of supply policy.
“The Ministry of Domestic Trade and Consumer Affairs will continue with its liberalisation of sugar policy and open to applications by any F&B (food and beverages) manufacturers in Sarawak, (whether) big or small, and we don’t need connection like it used to be during BN’s time,” he added.
jika RK beli balik MSM ringanlah beban FGV, jika ini terjadi SM masuk FGV dapat control MSM, so SM dapat control RK, aiseyman ini sudah macam cerita politik pulok
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
FGV_
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Posted by FGV_ > 2019-11-21 07:34 | Report Abuse
Revenue up latest QR means sugar buyers coming back.