Narrowing losses a good sign for MSM
KUCHING: Sugarmaker MSM Malaysia Holdings Bhd’s (MSM) normalised loss for the third quarter of financial year 2020 (3QFY20) further narrowed down to minus RM68.8 million from 3QFY19’s normalised loss of minus RM185.1 million.
The improvement in financial performance was mainly due to higher revenue recorded and lower operating costs. Cumulatively, 9MFY20 normalised loss for the first nine months of FY20 (9QFY20) contracted by RM90.8 million.
“Despite the Covid-19 pandemic, 3QFY20 revenue came in at RM594.6 million which was 11.8 per cent year on year (y-o-y) higher as compared to 9MFY19,” opined the team at MIDF Amanah Investment Bank Bhd (MIDF Research).
“This was mainly supported by the industries and export segment which grew by 11.3 per cent y-o-y and 434.4 per cent yo-y to RM236 million and RM171 million respectively.
“Both segment reported better sales volume and average selling price as compared to 3QFY19. Meanwhile, the wholesale revenue came in 35.6 per cent y-o-y lower at RM183 million, mainly due to lower retail demand following the Covid-19 pandemic.”
MIDF Research made no changes to its revenue
assumption. However, we it was adjusting the cost structure to better reflect the result thus far.
“As such, we expect FY20 loss to come in at minus RM106 million before recording a profit of RM9 million in FY21,” it added.
Post earnings adjustment, MIDF Research is reducing its target price to RM0.56 per share. Its valuation is based on forecasted FY21 book value per share of RM1.12 to the price-tobook ratio of 0.5 times, while its target price to book value is the group’s two year historical average multiple.
“We are comforted by the continuous improvement in the group’s financial performance as seen in its 2QFY20 results. This is despite the advent of the Covid-19 pandemic,” it
commented.
“While we acknowledged that it was still a loss-making quarter, the losses had gradually reduced.
“Moving forward, we expect demand from the export and industries segment to remain upbeat. However, the group’s revenue performance could be impacted by the underperformance from the wholesale segment.
“Thus, we maintain our view that the group’s financial performance would continues to improve in the coming quarters although the rate of improvement could be slower than initially anticipated. Given that we expect the group to make a little profit in FY21, we do not impute any dividend assumption yet.”