MSC returned to profitability in QE31/3/2011, with a net profit of RM28.3 million as compared to a net loss of RM22.0 million for QE31/12/2010 or RM29.1 million for QE31/3/2010. Turnover increased by 5.8% q-o-q or 21.0% y-o-y to RM788 million. Bottom-line improved due to higher operating profit from tin mining & smelting operations in Malaysia & Indonesia.
Table 1: MSC's last 8 quarterly results
Chart 1: MSC's last 21 quarterly results
Valuation
To value MSC is quite tricky. The group's result has been affected by provisioning due to investment carried out 2 or 3 years back. Will there be more provision in the future or will there be writeback as mining assets have appreciated significantly? If we value MSC based on the results of QE31/3/2011, we are assuming that the tin mining & smelting operations remain stable & there is no further positive or negative impact from provisioning or writeback exercise. Based on the annualized EPS of 122 sen (from the results for QE31/3/2011), MSC (closed RM4.38 yesterday) is now trading at a forward PE of 3.6 times. At this multiple, MSC can have significant upside. Conservatively, one can see MSC trading at a PE of 6 to 8 times.
Alternative entry to this stock
Investors can buy MSC through either Bursa Malaysia or SGX. As at May 9, MSC closed at RM4.38 on Bursa Malaysia or at S$1.77 on SGX. The price differential favor buying the stock via SGX. This will give rise to arbitraging as the differential of 6-7% is quite attractive.
Technical Outlook
Based on the chart below, MSC's immediate resistance is at RM4.60-4.65.
Chart 2: MSC's daily chart as at May 9, 2011 (Source: Quickcharts)
Conclusion
Based on good financial performance, attractive valuation & positive technical outlook, MSC could be a good stock for medium-term investment.
I remember this low profile counter was highlighted in ICAP AGM by Tan Teng Boo last year.
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