Supermx: Earnings Rebounded

Result Update

For QE30/9/2018, Supermx's net profit increased by 265% q-o-q or 29% y-o-y to RM36 million while revenue rose 11% q-o-q or 18% y-o-y to RM367 million. Revenue rose q-o-q due to increased sales (on account of the added capacity from the remaining lines that were commissioned at its 2 newest plants in QE31/12/2017) and a stronger USD vs RM.

Meanwhile, EBITDA and PBT rose sharply by 79% and 125%. The improvement was attributed to a combination of factors including higher sales recorded, decreased costs from improved operational efficiency and some extraordinary one-off costs recorded in the preceding quarter which were not incurred in the current quarter. As mentioned earlier, there was also an extraordinary gain of RM6.5 million recorded in the current quarter arising from an insurance claim for consequential loss. (My take: If the extraordinary gain of RM6.5 million is deducted, profit before tax would be lowered to RM46.1 million. This is comparable to PBT for QE31/3/2018 of RM45.5 million. I avoid comparing with PBT for QE30/6/2018 which was depressed by unexplained extraordinary one-off costs. When compared to same quarter last year, QE30/9/2017, adjusted PBT did increase by 13%!)


Table : Supermx's last 8 quarters' P&L

Graph: Supermx's last 48 quarters' P&L

Financial Position

Supermx's financial position as at 30/9/2018 is deemed adequate with current ratio at 1.0 time while gearing ratio was at 0.7 times.

Outstanding Corporate Exercise

Supermx has declared a 1-for-1 bonus which is pending shareholders' approval at its EGM to be held on November 30.

Valuation

Supermx (closed at RM3.24 yesterday) is now trading at a PER of 19x (based on last 4 quarters' adjusted EPS of 17.45 sen). At this PER, Supermx is deemed fairly valued.

Technical Outlook

Supermx share price had a sharp pullback since it peaked at RM4.50-4.60 in July. The decline brought the share price back to its uptrend line, SS at RM2.60. Its immediate resistance will be at RM3.35 & then RM3.50.


Chart: Supermx's weekly chart as at Nov 1, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on better financial performance, fairly attractive valuation, generous bonus issue ahead and mildly positive technical outlook, I am revising my rating for Supermx from a REDUCE to 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.