MPI (3867) : Malaysian Pacific Industries - A good start (ADD - Maintained)
Target RM7.50 (Stock Rating: ADD)
MPI’s 1QFY6/15 core net profit is in line with expectation at 23% of our and consensus full-year estimates. Core net profit grew by 13.7% yoy, driven by stronger shipment volume from higher margin packages and lower material cost. We maintain our EPS forecasts, which imply 2013-16 EPS CAGR of 48%, and keep our Add rating, with an unchanged target price of RM7.50, based on 14.3x CY16 P/E (its 2-year historical mean). MPI is our top pick for the semiconductor industry due to its strength in operating efficiency and better traction in higher margin packages. Stronger contributions from its communications and automotive segments, higher dividend payouts and potential M&A activities are potential re-rating catalysts.
1QFY15 highlight
Revenue fell by 0.9% yoy in 1QFY6/15, from RM330.6m to RM327.7m, due to lower contribution from the US (down 32.7% from RM98.8m to RM66.5m). However the impact was offset by the stronger revenue from its key revenue contributor Asia, which expanded 19.8% from RM153.9m to RM184.4m. MPI continued to benefit from its structural shift to higher margin packages and the weakness in commodity prices, with its 1QFY15 pretax profit rising 12.4% yoy. The company also declared a higher interim dividend of 7 sen in the quarter (vs 5 sen in 1QFY14), which is in line with our FY15 forecast of 21 sen. Apart from that, it also raised its capex spending to RM49.3m, against RM11.8m in 1QFY14, to support its capacity expansion and growth into array packages.
Stronger balance sheet position
MPI’s balance sheet position has improved commendably from last year given management’s ongoing initiatives to pare down borrowings from RM159m to RM84m currently. Therefore, we see room aplenty for higher dividend payouts given its stronger balance sheet position, supported with a healthy free cashflow generation of RM191m in FY14.
Maintain Add
Stay invested in the stock. We see sustainable earnings improvements from its communications and automotive segments, higher dividend payouts and potential M&A activities as potential key re-rating catalysts for the stock. We expect to get more information in today’s briefing.
Source: CIMB Daybreak - 13 November 2014
Target RM7.50 (Stock Rating: ADD)
MPI’s 1QFY6/15 core net profit is in line with expectation at 23% of our and consensus full-year estimates. Core net profit grew by 13.7% yoy, driven by stronger shipment volume from higher margin packages and lower material cost. We maintain our EPS forecasts, which imply 2013-16 EPS CAGR of 48%, and keep our Add rating, with an unchanged target price of RM7.50, based on 14.3x CY16 P/E (its 2-year historical mean). MPI is our top pick for the semiconductor industry due to its strength in operating efficiency and better traction in higher margin packages. Stronger contributions from its communications and automotive segments, higher dividend payouts and potential M&A activities are potential re-rating catalysts.
1QFY15 highlight
Revenue fell by 0.9% yoy in 1QFY6/15, from RM330.6m to RM327.7m, due to lower contribution from the US (down 32.7% from RM98.8m to RM66.5m). However the impact was offset by the stronger revenue from its key revenue contributor Asia, which expanded 19.8% from RM153.9m to RM184.4m. MPI continued to benefit from its structural shift to higher margin packages and the weakness in commodity prices, with its 1QFY15 pretax profit rising 12.4% yoy. The company also declared a higher interim dividend of 7 sen in the quarter (vs 5 sen in 1QFY14), which is in line with our FY15 forecast of 21 sen. Apart from that, it also raised its capex spending to RM49.3m, against RM11.8m in 1QFY14, to support its capacity expansion and growth into array packages.
Stronger balance sheet position
MPI’s balance sheet position has improved commendably from last year given management’s ongoing initiatives to pare down borrowings from RM159m to RM84m currently. Therefore, we see room aplenty for higher dividend payouts given its stronger balance sheet position, supported with a healthy free cashflow generation of RM191m in FY14.
Maintain Add
Stay invested in the stock. We see sustainable earnings improvements from its communications and automotive segments, higher dividend payouts and potential M&A activities as potential key re-rating catalysts for the stock. We expect to get more information in today’s briefing.
Source: CIMB Daybreak - 13 November 2014
