Kumpulan Perangsang Selangor's (KPS) reported a weaker 3QFY24 core net profit of RM3.8m (-4.2% YoY), primarily due to foreign exchange (forex) losses amounting to RM9.4m. The cumulative 9MFY24 net profit of RM7.9m is below both our and consensus estimates, accounting for only 51.2% and 53.2% of full-year estimates, respectively. The discrepancies were mainly due to a stronger Ringgit against the USD, affecting the Group's business division with USD-denominated sales. However, as the USD has recently strengthened against the Ringgit, some degree of reversal is expected in the coming quarter. As such, we maintain our earnings forecasts and reiterate our Neutral call on KPS with an unchanged TP of RM0.78.

• 3QFY24 revenue declined by 3.6% YoY to RM275.6m, mainly due to weaker contribution from the manufacturing segment and absence of rental income from Plaza Perangsang which was disposed recently in July 2024. The manufacturing business recorded a 4.5% YoY decline to RM232.3m, mainly attributed to weaker demand in the packaging and metal machining business. This was partially offset by increased revenue from the trading sector, which grew by 6.3% YoY to RM43.3m, driven by higher sales of water chemicals and water meters.
• 3QFY24 core net profit declined by 4.2% YoY to RM3.8m, primarily due to weaker contribution from the manufacturing segments. Profit before tax (PBT) for manufacturing business decreased by 10.7% YoY to RM16.7m, driven by lower revenue and forex losses. This was partially offset by stronger contribution from Trading business, which reported a higher PBT of RM3.4m (+46.5% YoY), in line with increased revenue and improved margin. Overall, the Group's blended PBT margin decreased marginally to 3.4%, compared to 4.0% in 3QFY23.
• Subdued outlook. Elevated core inflation, a sluggish demand recovery, and on-going market uncertainty, stemming from geopolitical tensions continue to hinder global growth and suppress demand for consumer electronics. In response, KPS is prioritising efforts to optimise operational efficiency and diversify its revenue streams. These strategies aim to mitigate the challenges faced by the manufacturing sector and supporting the Group's long-term growth and profitability.

Source: PublicInvest Research - 29 Nov 2024