magnitech 3q16
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Key Statistics
Bloomberg Ticker MTI MK
Masa Ticker / Stock Code MAGNI/7087
Shares Issued (m) 162.7Market Capitalisation (RM’m) 727.4
52 Week Hi/Lo Price (RM) 4.66/2.041
Avg Trading Volume (3-mth) 231,947
Est Free Float (m) 63.1
YTD Returns (%) 0.43
Beta (x) 0.76
Major Shareholders (%)
Tan Poay SengKP Holdings Sdn Bhd
Perbadanan Nasional Bhd
Kamarudin b Jaffar
Berjaya Corp Bhd
18.4813.09
7.44
6.64
6.28
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est Wing, Level 13,
Berjaya Times Square,
No 1, Jalan Imbi,
55100 Kuala Lumpur
el: (03) 21171888
Fax: (03) 21427678For Internal Circulation Only
KDN PP8927/07/2013(032977)
Consumer Products
22 Mar 2016
Results Update
Non RatedCurrent Price RM 4.47
Target Price RM 5.30
Analyst: Brian Yeoh
Email: [email protected]
1-Year Share Price Performance
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Magni-Tech Industries Bhd
We retain our views on Magni-Tech Industries Bhd (Magni) with a target price of RM5.30
(+18.6%) upside based on a SoP valuation. This is based on a revised FY16/17 PER of 10x for the
garment segment (previously 14x) and a 5x PER to its Packaging segment. Its main local peer,
Prolexus's share price is trading at a 12mth trailing PER of 8x, but we have assigned a premium
valuation to Magni despite an unchanged TP vis-à-vis the Apparel Manufacturers sector mean,
ahead of the upcoming expansion plans mentioned in our previous briefing note. Aside that, we
believe there is still strong earnings visibility coming from:- 1) strong earnings growth from Nike-
we expect the company to post Q3 profits that outstrips street forecasts once again, 2) Trans
Pacific Partnership Agreement gains for “Made in Malaysia/Vietnam” clothing, 3) Bri ght long-
term prospects in the apparels industry, 4) strong cashflows and balance sheet.
Results Review
Magni reported net earnings of RM26.1mil in 3QFY16, an increase of 49.0% YoY, and 20.5%QoQ.
Similarly, revenues stood at RM268.9mil, climbed 34.2% YoY and 36.3% QoQ. Topline-wise, the
garment segment continues its stellar performance, as segment revenues grew +34.7%YoY, +36.3%
QoQ on the back of higher sales orders received. Margins are still holding up very well mainly
attributed to favourable currency exchange rate, positive results from on-going productivity
improvements and continuing lean manufacturing measures. Going forward, we revise our
earnings forecasts for FY16/17 and FY17/18f as the company's 9MFY16 earnings have already
exceeded our full year forecast net income of RM63mil. Our FYEApr16e and FYEApr17e earnings
estimates have had to be upgraded by 31.3% and 34.6% respectively. In conjunction with the
earnings announcement, Magni declared a second single tier interim dividend of 3 sen per
ordinary share and a single-tier special dividend of 2 sen per ordinary share, making the total
payout FYTD 13 sen.
Table 1 : Earnings Forecasts
FYE April FY13 FY14 FY15 FY16(f) FY17(f)
Revenue (m) 565.8 651.3 716.4 890.0 940.0
Pretax Profit (m) 48.0 55.4 69.4 108.7 126.5
Net Profit (m) 35.8 42.0 52.2 82.7 96.5
EPS (sen) 22.0 25.8 32.1 50.8 59.3
Pretax margin (%) 8.5 8.5 9.7 12.2 13.5
Net Profit margin (%) 6.3 6.4 7.3 9.3 10.3
PER (x) 20.3 17.3 13.9 8.8 7.5DPS (sen) 13.0 13.0 15.0 15.0 18.0
Dividend Yield (%) 2.9 2.9 3.4 3.4 4.1
ROE (%) 18.2 19.0 20.6 28.9 30.6
ROA (%) 14.0 14.5 16.3 23.4 24.8
Net Gearing Ratio (%) Net Cash Net Cash Net Cash Net Cash Net Cash
BV/Share 1.27 1.44 1.68 2.03 2.51
Price/Book Ratio (x) 3.51 3.10 2.67 2.20 1.78
#Readers are advised to take note that Inter-Pacific Research Sdn Bhd is a member of the Berjaya
Corporation Bhd Group which holds 6.28% in Magni-Tech Industries Bhd. For further information,
please refer to the Disclaimer on Page 3.
Powerful Stitch!
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Table 4: Local Apparel Industry Peers Comparison (as at 22 Mar 2016)
Mkt Cap Price EPS (RM) P/E (x) ROE Div Yield
Company (RM mil) (RM) trailing fwd trailing Fwd (%) (%)
PADINI HOLDINGS BERHAD 1,368.5 2.08 0.17 0.17 12.48 12.53 26.3 4.81
MAGNI-TECH INDUSTRIES BHD 727.4 4.47 0.49 0.51 9.12 10.0 26.2 1.79
PROLEXUS BHD 226.5 1.97 0.22 0.26 8.84 9.6 21.3 1.37
CAELY HOLDINGS BHD 40.8 0.51 0.09 n/a 5.73 n/a 6.1 1.96
CHEETAH HOLDINGS BHD 51.0 0.43 0.01 n/a 30.07 n/a 1.3 1.74
Simple Average 0.196 0.31 13.25 10.7
Source: Bloomberg, Inter-Pacific
Table 3: Segment Results
3Q16 3Q15 YoY chg (%) 2Q16 QoQ chg (%)
Packaging 40.88 31.1 31.4 30.0 36.3
Garment Manufacturing 228.04 169.3 34.7 167.3 36.3
Total Revenue 268.92 200.40 34.2 197.35 36.3
Packaging 1.82 1.6 13.8 1.3 40
Garment Manufacturing 31.75 21.1 50.5 26.5 19.8
Unallocated corporate expenses (0.08) 0 n/a
Total results 33.50 22.70 47.6 27.8 20.5
Margins (%)
Packaging 4.9 5.1 4.3
Garment Manufacturing 13.7 12.5 15.8
Note: Segment Data are Inter-Pacific estimates as earnings release does not net out inter-segment transactions
Source: Company, Inter-Pacific
Table 2: Financial Highlights
FYE April (RM' mil) 3Q16 3Q15 YoY chg (%) 2Q16 QoQ chg (%)
Revenue 268.9 200.4 34.2 197.3 36.3
Profit before tax 34.2 23.1 47.9 28.7 19.1
Tax Expense -8.1 -5.6 44.5 -7.0 14.8
PATAMI 26.1 17.5 49.0 21.6 20.5EBITDA 38.4 27.4 39.9 24.5 56.9
PBT margin (%) 12.7 11.5 10.4 14.5 -12.4
PATAMI margin (%) 9.7 8.7 11.5 11.0 15.5
EPS (sen) 16.0 16.1 -0.6 13.3 20.5
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IMPORTANT: This report has been prepared from sources that are believed to be reliable but we do not hold ourselves responsible for its completeness and accuracy.
All opinions and estimates in this report are subject to change without notice. We do not accept any liability that may arise from the use of information in this report.
Inter-Pacific Research SdnBhd and or its associates may from time to time have interest and/or underwriting commitments in the company being reported. This
report is for internal circulation only and the contents or any part thereof cannot be reproduced in any manner whatsoever except with the prior written consent of
Inter-Pacific Research Sdn Bhd.
Published and Printed by:
Inter-Pacific Research SdnBhd (449005-X)
West Wing, Level 13,Berjaya Times Square,
No.1, JalanImbi,
55100 Kuala Lumpur
General Line : 03-2117 1888 Fax : 03-2142 7678
Ratings System
Ratings: Description:
BUY Total return is expected to exceed 15% in the next 12 months
NEUTRAL Total return is expected to be between above –15% to 15% in the next 12 months
SELL Total return is expected to be below -15% in the next 12 months
Abbreviation
Abbreviation Definition Abbreviation Definition
PER Price Earnings Ratio CAGR Compounded Annual Growth Rate
PEG PER to Growth CAPEX Capital Expenditure
EPS Earnings per Share DPS Dividend per Share
FYE Financial Year End ROA Return on Asset
FY Financial Year ROE Return on Equity
CY Calendar Year PBT Profit Before Tax
MoM Month-on-Month PAT Profit After Tax
QoQ Quarter-on-Quarter EV Enterprise Value
YoY Year-on-Year EBIT Earnings Before Interest And TaxYTD Year-to-Date EBITDA EBIT Depreciation &Amortisation
p.a. Per Annum WACC Weighted Average Cost of Capital
DCF Discounted Cash Flow NTA Net Tangible Asset
FCF Free Cash Flow BV Book Value
NAV Net Asset Value