Magni: Earnings Stayed Weak

Results Update

In QE30/4/2018, Magni's net profit dropped 35% q-o-q or 48% y-o-y to RM20 million while revenue dropped 30% q-o-q or 26% y-o-y to RM221 million.

Group revenue decreased by 26% q-o-q due to 28%-decline in garment revenue mainly due to lower sale orders received and unfavorable foreign exchange movements; 12%-drop in packaging revenue mainly due to the cessation of offset printing packaging (OPP) business in Q4-FYR 2017; and 3%-dip in revenue of the continuing packaging operations (comprising flexible plastic and corrugated packaging) due to lower sale orders received.

PBT decreased by 50.3% q-o-q due to 51%-drop in garment PBT mainly due to lower revenue, higher foreign exchange loss (by RM3.082 million) and higher operating expenses to revenue ratio; 42%-drop in Packaging PBT mainly due to lower revenue in Q4-FYR 2018; and reversal of provision for OPP business closure costs (RM0.307 million) in Q4-FYR 2017.

Table: Magni's last 8 quarterly results


Graph: Magni's last 45 quarterly results

Valuation

Magni (closed at RM5.10 last Friday) has a trailing PE of 9 times (based on last 4 quarters' EPS of 56.15 sen). Albeit the dividend cut, Magni still pays quarterly dividend which totaled 20 sen in the past 4 quarters; giving the stock a DY of 3.9%. Overall, Magni is still fairly valued.

Technical Outlook

Magni could have broken its long-term uptrend.


Chart 1: Magni's monthly chart as at June 22, 2018 (Source: ShareInvestor.com)

However, Magni has recently broken above its intermediate downtrend line, RR. Magni's immediate support will be at RM4.60-4.70.


Chart 2: Magni's weekly chart as at June 22, 2018 (Source: ShareInvestor.com)

Conclusion

Despite the weaker earnings and bearish technical outlook, I would rate Magni a HOLD to reflect a temporary pause in performance of an outstanding stock.

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.