MSC- never-ending write-off

Results Update

MSC reported a very disappointing set of results for QE31/12/2010. It continued to incur losses due to huge impairment provision for its investment in mining assets. This provision is unexpected given the current bullish commodities cycle. As a results of a net loss & provision made totaling RM32.8 million, MSC incurred a pre-tax loss of RM24 million for QE31/12/2010. For more, see Note 5. Unusual Items of the Notes to the Accounts.


Table: MSC's last 8 quarterly results



Chart 1: MSC's last 20 quarterly results

As a result of these losses (a legacy of a more profligate investment climate in 2008), MSC's share price has failed to benefit from the recent sharp run-up in the price of tin. (As an aside, you may want to compare the non-action in MSC to the sharp rally in Ho Wah Genting ('HWGB') on its purported venture into tin mining. One begins to wonder whether investors are being too optimistic about HWGB's future prospect if an experienced company like MSC can perform so badly in this business.)


Chart 2: Tin prices over the past 5 years (Source: LME)

Techncial Outlook

MSC broke its medium-term uptrend line supoort at RM4.55-4.60 in mid-February. Yesterday it broke the horizontal support at RM4.20. Its next support is at the horizontal line RM3.80.


Chart 3: MSC's daily chart as at Feb 25, 2011_12.30pm (Source: Quickcharts)

Conclusion

Based on poor financial performance & bearish technical outlook, MSC should be avoided. It is possible that this round of provisioning for impairment loss is the last one and the stock would slowly recover from hereon. Until you see a positive bottom-line & announcement of sale of its mining assets, MSC would continue to spring surprises on its shareholders.