Which is better- Magnum or Magnum4D? Part 2

This is the second part of a 2-part report.

Magnum’s Current Financial Performance

Magnum’s net profit increased 10.0% q-o-q or 36.1% y-o-y to RM66.5 mil. Turnover has increased 11.2% y-o-y from RM644 mil to RM716 mil. Like Magnum4D, Magnum’s 2Q turnover is normally lower than its 1Q’s turnover and it is no different for FYE2006. Turnover for 2Q2006 of RM716 mil is down 8.2% when compared to 1Q2006 of RM780 mil. This is much smaller than the 14.0% drop experienced in FYE2005.








Valuation

Using the EPS for 2Q2006 of 4.6 sen, we can arrive at an annualized EPS of 18.4 sen. Based on this & the share price of RM2.11 at the close of the closing session today, Magnum’s PE is about 11.5 times, much lower than Berjaya Sports Toto("BToto")’s PE of 15 times. As such, Magnum may be preferred over BToto.

Technical Picture

I have been quite fascinated with Magnum's technical outlook for quite sometime. You may recall that I have highlighted the possible reversal of Magnum's downtrend in July (go here). Magnum has in fact did a breakout of its diamond-shape bottoming formation on August 11 but that breakout could not hold. At the close of this morning session, Magnum has again broken above the RM2.08 level. I believe this time around, the breakout should be able to sustain. Other reason for my mildly bullish stance comes from the crossover of the 20-day MA by the faster 10-day MA. For better picture, take a good look at the chart below.

















Chart: Magnum's weekly chart as at August 23

Recommendation

Based on improving financial & possible bullish reversal, I would recommend Magnum for a LT investment.

In the final comparison, I would prefer Magnum4D to Magnum because of cheaper valuation. There is some unconfirmed report (read: rumours) that Magnum may privatize Magnum4D in order to "capture" the entire earning of Magnum4D. This is not surprising and Magnum has the means to do so as it has a cash reserve of RM814 mil as at 30/6/06.