Lower-than-expected FY18 profits for SCGM

KUALA LUMPUR: SCGM Bhd (SCGM) saw its core net profit for financial year 2018 (FY18) coming in at RM15.4 million which was below expectations of Kenanga Investment Bank Bhd (Kenanga Research) at 80 per cent.

Top-line came in below expectations due to lower sales from domestic and overseas customers, while core net profit margin was also weaker than expected at 7.4 per cent due to higher resin and labour costs.

“This is the fifth quarter in a row where results have disappointed our estimates.

“A fourth interim dividend of 1.50 sen was declared, implying FY18 total dividend of RM10.9 million or 5.60 sen post accounting for the enlarged share base from the bonus issue.

“This is above our expectation at 124 per cent of FY18E dividend of 4.50 sen as we had assumed a lower payout ratio of 45 per cent versus management's actual FY18 payout of 66 per cent.”

Year to date, SCGM's core net profit was down by 32 per cent to RM15.4 million due to lower operating profit due to a combination of factors, including higher resin prices, higher finance costs, higher depreciation charges, and higher labour cost.

EBIT margin was weaker at 10 per cent while effective tax rate was marginally higher at 14.3 per cent.

Quarter on quarter, top-line was down by 10 per cent due to lower sales from local and overseas customers which were affected by the holidays during the current quarter and strengthening of Ringgit Malaysia against major foreign currencies.