Thursday, March 06, 2014

MSC: Returning to profitability

Results Update

For QE31/12/2013, MSC returned to profitability with a net profit of RM29 million as compared to net losses of RM22 million in QE30/9/2013 or RM131 million in QE31/12/2012. Revenue dropped 20% q-o-q or 41% y-o-y to RM336 million.

Revenue dropped 41% y-o-y due to lower quantity of refined tin sold. Excluding exceptional items, profit rose from RM13.02 million to RM31.72 million due to higher average tin prices and higher profit from sales of by-product. Associates & JVs recorded a net share of losses of RM3.71 million (compared to a net profit of RM4.20 million last year) due to mine closure costs for the Rapu Rapu mines in the Phillipines.

Table: MSC's last 8 quarterly results

Chart 1; MSC's last 32 quarterly results

Tin Price Movement

Tin Prices have been range-bound at USD20,000-25,000/t. However, tin is in a long-term uptrend. If it can break above USD25,000/t, tin prices may rally to its 2011 high of USD32,000/t.

Chart 2: Tin price chart as at Feb 2014 (Source: Indexmundi)


MSC (closed at RM3.13 yesterday) is trading at a PE of 18 times (based on the last 4 quarters' EPS of 17 sen). Its Price to Book Value is at 1.4 times (based on NTA of RM2.23 as at 31/12/2013). As such, MSC is deemed expensive.

Technical Analysis

MSC has just broken above its downtrend line at RM2.90. With this breakout, MSC may trade sideways until a new upleg takes place.

Chart 3: MSC's weekly chart as at Feb 26, 2014 (Source: Tradesignum)


Despite the mildly bullish technical outlook, MSC is a stock that may warrant close tracking for now. Its erratic financial performance and expensive valuation preclude any strong conviction on the part of investors & traders alike. The best that I can muster is that the stock could be a trading BUY.

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MSC.

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