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Wednesday, December 13, 2017

Magni: Profits Stabilize While Revenue Still Sliding

Results Update

In QE31/10/2017, Magni's net profit dropped 28% y-o-y to RM20.5 million while revenue dropped 10% y-o-y to RM252 million. However, net profit rose 5% q-o-q though revenue still dropped 14% q-o-q.

Group revenue dropped y-o-y due to 8.7%-decline in Garment revenue due to lower sale orders received and 18.9%-drop in Packaging revenue due to the cessation of offset printing packaging business in Q4-FYR 2017.

Group PBT dropped 28.0% y-o-y due to 26.3%-drop in Garment PBT which mainly due to lower revenue, higher operating expenses and foreign exchange loss. Packaging PBT decreased by 59.1% y-o-y mainly due to higher raw material costs and operating expenses, and lower revenue

As a result of lower profits, Magni cut its dividend to 4.5 sen from 5 sen paid out in the same quarter last year.


Table: Magni's last 8 quarterly results


Graph: Magni's last 43 quarterly results

Valuation

Magni (closed at RM6.01 yesterday) has a trailing PE of 9 times (based on last 4 quarters' EPS of 66.46 sen). Albeit the dividend cut, Magni still pays quarterly dividend which totaled 21 sen in the past 4 quarters; giving the stock a DY of 3.5%. Overall, Magni is still fairly valued.

Technical Outlook

Magni is still in a long-term uptrend. That uptrend has accelerated twice fom SS to S1-S1 to S2-S2. The support of S2-S2 is at RM6.00. The next support will be at the uptrend line, S1-S1 at RM5.00. The indicator readings are not encouraging; the MACD line is poised to cross below the MACD signal line, the +DMI is dropping against a rising -DMI, and, lastly, Slow Stochastic has broken its uptrend line. All these indicator readings are warning signs that the RM6.00 support may not hold out for long.


Chart: Magni's monthly chart as at Dec 12, 2017 (Source: ShareInvestor.com)

Conclusion

Despite the poorer earnings and dividend cut, Magni is still a good stock for long-term investment. The good entry level may be between RM5.00 and RM5.50.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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