Revenue dropped y-o-y due to lower Garment revenue which decreased by 0.8% due to unfavorable foreign exchange differences and lower Packaging revenue which dropped 12.7% due to the closure of offset printing packaging business. These were partially offset the higher revenue from the continuing packaging operations which increased by 1.8%.
PBT dropped y-o-y due to lower Garment PBT which decreased by 43.2% mainly due to lower gross profit margin, higher operating expenses and softer revenue; lower Packaging PBT which dipped by 47.9% mainly due to higher raw material costs for corrugated packaging business. In addition, the comparative PBT for the immediate preceding quarter i.e. QE30/4/2017 was inflated by insurance claims (RM0.216 million) and reversal of over provision of business closure costs (RM0.356 million) in QE30/4/2017 by the discontinued packaging operation.
As a result of the sharp drop in profits, Magni cut its dividend to 3.5 sen from 6 or 7 sen in the immediate past 2 quarters. While the dividend cut may conserve its reserve for contingency or for new investment.
Table: Magni's last 8 quarterly results
Graph: Magni's last 42 quarterly results
Magni (closed at RM6.16 on Friday) has a trailing PE of 8.6 times (based on last 4 quarters' EPS of 71.39 sen). Albeit the dividend cut, Magni still pays quarterly dividend which totaled 21.5 sen in the past 4 quarters; giving the stock a DY of 3.5%. Overall, Magni is still quite attractively valued.
Magni is still in a long-term uptrend, supported by its 10-month EMA line at RM6.00. Below this, Magni may have support from the 20-month EMA line at RM5.00 and then the horizontal line at RM4.50.
Chart 1: Magni's monthly chart as at Sep 15, 2017 (Source: ShareInvestor.com)
Chart 2: Magni's weekly chart as at Sep 15, 2017 (Source: ShareInvestor.com)
Despite the sharp drop in earning and dividend cut, Magni is still a good stock for long-term investment based on attractive valuation. After the sufficient price drop, the stock will be more appealing. The good entry level may be between RM5.00 and RM6.00.
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