Investment Highlights

• We maintain BUY call on Malaysian Pacific Industries (MP with a lower fair value (FV) of RM38.15/share (from RM49.43/share previously) by moderating FY25F target P from 30x to 28x – 1.5 SD above its 5-year mean of 20x. W continue to ascribe a neutral ESG rating of 3 stars.

• We maintain our FY25F-FY26F earnings following the analy briefing and introduce FY27F earnings with a growth of 22% tandem with revenue increase of 15%. Key takeaways from th briefing are:
  • The automotive segment, which contribute 36% to 4QFY2 revenue, has shown signs of weakening given slowin sales in China as the European Union imposed tariffs 17.1%-38.1% on China-made electric vehicles (EVs) la month.
    
    However, management has guided that the segment expected to recover within the next 2-3 quarters am expectations of a compromise between industry player environmental lobbies and governments. Despite th recent decline, management remains confident th automotive orders will recover over the longer term.
     
  • MPI’s industrial segment, which accounted for 43% 4QFY24 revenue, grew by 13% QoQ. Management expec further contributions from power packaging modules this segment, driven by robust demand from data centre as power packages enhance electrical efficiency.
     
  • MPI’s consumer segment accounted for 13% of 4QFY2 revenue and remained flat QoQ, while the person computer division increased its share to 7% from 5% 3QFY24. Both segments continue to recover from hig inventory corrections in the past. However, ongoin geopolitical tensions and persistently high interest rate may constrain consumer spending, potentially restrictin growth in these areas.
     
  • The group will continue its strategic investment efforts b seeking additional anchor customers to secure mo business for the future. During the year, the group ha invested in a new factory in Ipoh, added an additional flo in Carsem (Ipoh) and developed a new site in Chin Hence, we anticipate improving growth in orderbook ov the upcoming quarters despite prevailing mark uncertainties.
     
  • FY24 capex, including these expansions, decreased b 10% YoY to RM225.8mil.

• Moving forward, we remain cautiously optimistic about the group’s growth prospects, due to:
  
  (i) The uncertain global business outlook amid ongoing geopolitical tensions and the US-China trade war,
  
  (ii) Increasing global demand for EVs, artificial intelligence chips and data centres, and
  
  (iii) Ongoing innovation in advanced packaging capabilities and the implementation of operational efficiency measures to manage costs effectively.

• From a valuation perspective, the stock is currently trading at an attractive 20.6x FY25F PE, which is at a discount to its 5-year peak of over 33x.

Source: AmInvest Research - 30 Aug 2024