Malaysian Pacific Industries Bhd (Nov 9, RM3.22)
Maintain underperform with revised target price of RM2.57 from RM2.75: A shortfall in revenue and margins was behind MPI’s 1QFY12 ending June results miss. This cannot be fully offset by the dividend, which was below expectations. The market is likely to react negatively to the poor demand and low utilisation that these results denote.
MPI turned in a 1QFY12 loss as opposed to our and consensus forecast of a full-year profit. We slash our earnings and dividends as a result. This reduces our target price, based on a 60% discount to its five-year historical adjusted average price-to-book value. We reiterate our “underperform” call.
MPI’s revenue fell by 8% quarter-on-quarter (q-o-q) and 15% year-on-year (y-o-y), thanks to lower revenue for all business segments and a more challenging external environment which crimped demand and order flows. We believe that MPI did not resort to price cutting to fill up capacity as it had in 4QFY11. This probably led to lower utilisation rates on a q-o-q basis. Earnings before interest, tax, depreciation and amortisation (Ebitda) margins fell by a sharp 3.6 percentage pts q-o-q due to lower capacity utilisation and pricier inputs.
Despite the loss-making quarter, MPI declared a dividend per share (DPS) of five sen, which, though positive, is below our previous forecast of 23 sen net DPS for FY12 and is only half of last year’s rate. It does not, we believe, make up fully for the 1QFY12 earnings letdown.
MPI expects a challenging FY12 given the softening demand and uncertain macro outlook, much like its customers which forecast 4Q top line declines of 9% to 13% q-o-q in the case of Intersil, 3% to 9% for Maxim and 8% for ST Micro. For MPI, we now forecast narrower profits for FY12 to reflect this. Note that there is downside risk to our forecast. — CIMB IB Research, Nov 9
This article appeared in The Edge Financial Daily, November 10, 2011.
Maintain underperform with revised target price of RM2.57 from RM2.75: A shortfall in revenue and margins was behind MPI’s 1QFY12 ending June results miss. This cannot be fully offset by the dividend, which was below expectations. The market is likely to react negatively to the poor demand and low utilisation that these results denote.
MPI turned in a 1QFY12 loss as opposed to our and consensus forecast of a full-year profit. We slash our earnings and dividends as a result. This reduces our target price, based on a 60% discount to its five-year historical adjusted average price-to-book value. We reiterate our “underperform” call.
MPI’s revenue fell by 8% quarter-on-quarter (q-o-q) and 15% year-on-year (y-o-y), thanks to lower revenue for all business segments and a more challenging external environment which crimped demand and order flows. We believe that MPI did not resort to price cutting to fill up capacity as it had in 4QFY11. This probably led to lower utilisation rates on a q-o-q basis. Earnings before interest, tax, depreciation and amortisation (Ebitda) margins fell by a sharp 3.6 percentage pts q-o-q due to lower capacity utilisation and pricier inputs.
Despite the loss-making quarter, MPI declared a dividend per share (DPS) of five sen, which, though positive, is below our previous forecast of 23 sen net DPS for FY12 and is only half of last year’s rate. It does not, we believe, make up fully for the 1QFY12 earnings letdown.
MPI expects a challenging FY12 given the softening demand and uncertain macro outlook, much like its customers which forecast 4Q top line declines of 9% to 13% q-o-q in the case of Intersil, 3% to 9% for Maxim and 8% for ST Micro. For MPI, we now forecast narrower profits for FY12 to reflect this. Note that there is downside risk to our forecast. — CIMB IB Research, Nov 9
This article appeared in The Edge Financial Daily, November 10, 2011.
