MSC's net profit increased by 15% q-o-q to RM41.8 million while turnover inched up by 6.4% to RM907 million. Compared to last year, MSC had achieved a return to profitability as it had incurred a net loss of RM37.1 million in the same quarter last year. Sequentially higher bottom-line was attributed to higher operating margin from both tin mining & smelting divisions as well higher contribution from its investment in KM Resources Inc.
Table: MSC's last 8 quarterly results
Chart 1; MSC's last 23 quarterly results
Tin Price Movement
MSC has benefited from the higher prices for tin in the past 2 years. The impact on the bottom-line was only felt in the past 3 quarters because MSC has been providing for diminution in value for investment in mining assets as well as incurring losses on disposal of such assets. If tin prices can maintain at the current level, MSC's bottom-line should be fairly healthy.
Chart 2: Tin price chart as at Nov 7, 2011 (Source: LME)
Indonesia's Tin Export Freeze
Recent decision by the Indonesian government to freeze the export of tin ingot has created some uncertainty in the market. The freeze shall last until end of December or until the price of tin has been lifted to above USD25000 a tonne. With tin price now hovering about USD22000 a tonne, the Indonesian freeze seems to have a positive impact on the price of tin. More importantly, it seems to be holding quite well. While I viewed this as positive for tin producers & MSC, the Indonesian government decision could have long-term implication if it leads to substitution by the users of tin. For more, go here.
Valuation
MSC (closed at RM4.24 at the end of the morning session) is trading at a PE of 5.4 times (based on the last 4 quarters' EPS of 79 sen). At this multiple, MSC is deemed fairly attractive. It also trades at a Price to Book of 0.9 times.
Technical Analysis
MSC is in a medium-term uptrend. Its price movement seems to be enclosed within an upward channel, with support & resistance at RM3.50 & RM6.20.
Chart 3: MSC's weekly chart as at Nov 8, 2011_12.30pm (Source: Quickcharts)
Chart 4: MSC's monthly chart as at Nov 8, 2011 (Source: Tradesignum)
Conclusion
Based on attractive valuation, satisfactory financial performance & positive technical outlook, I would rate MSC a good stock for long-term investment.
Hi Alex, any advise on Cypark? It has lost its shine after failing to break its resistance of RM3.20. Any worth taking another look? Earnings seems to be sustainable and its the only renewable energy counter.
ReplyDeleteHi Stanley
ReplyDeleteCypark is trading at a PE of less than 10 times, based on EPS of about 16 sen & current price of RM1.54.
However, it is still in a medium-term downtrend line with resistance at RM1.70. If it can break above that level, it may begin its recovery.