MUDA: Earnings Stayed Heallthy

Results Update

For QE31/3/2018, Muda's net profit dropped 56% q-o-q or 13% y-o-y to RM15.7 million while its turnover was mixed - down 18% q-o-q but rose 17% y-o-y to RM372 million.

Revenue rose y-o-y 17.3% mainly attributable to higher selling price of industrial paper and paper packaging products and higher sales volume from the latter. Sales volume for industrial paper suffered a minor setback during the quarter due to competition from imported paper. Strengthening ringgit and increased supply from overseas paper mills to Malaysia has resulted in lower turnover during the quarter under review. However, the shortfall was compensated by better selling price. For paper packaging products, improving economy and the success of selling price increase to cover increased raw material cost has resulted in higher revenue to the Group.

Compared to the corresponding quarter in 2017, lower cost of waste paper, higher selling price of industrial paper and better selling price of paper packaging products contributed to improvement in gross margin of the Group despite higher operating cost for the quarter under review. The improved gross margin has resulted in higher profit before tax in the current quarter. Profit before tax for the quarter under review is 7.6%  higher than the corresponding period in 2017. If the impact of net compensation from the insurer for the fire which occurred in 2016 was eliminated, the adjusted profit of RM19.4 million for the current quarter under review is 2.4 times higher the adjusted profit of RM8.2 million in the corresponding quarter in 2017.


Table: Muda's last 8 quarterly results


Graph: Muda's last 48 quarterly results
 
Valuation

Muda (trading at RM2.15 as at 11.45am) is trading at a PE of 11.6 times (based on last 4 quarters' EPS of 18.5 sen). At this PER, Muda is deemed fairly attractive.

Technical Outlook

Muda is in a steep short-term uptrend based on the 10-week SMA line at RM2.20.


Chart 1: Muda's weekly chart as at May 30, 2018_11.45 (Source: ShareInvestor.com)

From Chart 2, we can see that Muda is in a long-term uptrend line, with support at RM1.40.


Chart 2: Muda's monthly chart as at May 30, 2018_11.45 (Source: ShareInvestor.com)

Conclusion

Based on improving financial performance, attractive valuation and bullish technical outlook, Muda is rated a BUY on WEAKNESS.

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.