1. Strong Profit In Latest Quarter
Magnum released its March 2016 quarterly result last week.
Q-o-Q, net profit increased by 74% to RM68.8 mil. EPS works out to be approximately 4.8 sen.
Quarter Result:
| F.Y. | Quarter | Revenue ('000) | Profit Attb. to SH ('000) | EPS (Cent) | DPS (Cent) |
|---|---|---|---|---|---|
| 2016-12-31 | 2016-03-31 | 752,563 | 68,840 | 4.84 | 4.00 |
| 2015-12-31 | 2015-12-31 | 668,431 | 39,541 | 2.80 | 3.50 |
| 2015-12-31 | 2015-09-30 | 660,174 | 37,972 | 2.70 | 2.50 |
| 2015-12-31 | 2015-06-30 | 657,289 | 59,825 | 4.20 | 5.00 |
| 2015-12-31 | 2015-03-31 | 791,276 | 90,763 | 6.40 | 5.00 |
| 2014-12-31 | 2014-12-31 | 727,414 | 60,588 | 4.20 | 5.00 |
| 2014-12-31 | 2014-09-30 | 669,986 | 45,417 | 3.20 | 5.00 |
| 2014-12-31 | 2014-06-30 | 696,596 | 67,999 | 4.80 | 5.00 |
| 2014-12-31 | 2014-03-31 | 792,545 | 82,534 | 5.80 | 5.00 |
2. Share Price At All Time Low
Back in 2013, Magnum used to trade as high as RM4.00. Its current share price of RM2.28 is an all time low.
3. Strong Dividend Yield
Magnum traditionally declared 20 sen dividend per annum. However, it scaled down to 16 sen in FY2015, in line with weaker earnings.
| F.Y. | Revenue ('000) | Profit Attb. to SH ('000) | EPS (Cent) | PE | DPS (Cent) | DY |
|---|---|---|---|---|---|---|
| 2015-12-31 | 2,767,010 | 228,101 | 16.00 | 15.69 | 16.00 | 6.37 |
| 2014-12-31 | 2,886,541 | 256,538 | 18.00 | 15.17 | 20.00 | 7.33 |
| 2013-12-31 | 2,991,338 | 267,798 | 18.80 | 16.81 | 20.00 | 6.33 |
Based on current price of RM2.28, dividend yield is 7%.
Please note that back in FY2013 and FY2014, Magnum declared DPS of 20 sen when EPS was approximately 18 sen.
With the recent earning recovery, can DPS go back to 20 sen, thereby translating into dividend yield of 8.8% (based on RM2.28) ? The likelihood is there.
Anyway, the company declared an interim dividend of 4 sen last week. It will go ex on 8 June 2016. Please refer below :
4. Concluding Remarks
It is not easy to make money in stock market. We are now almost 6 months into 2016, and my portfolio has only begun to turn profitable. Some of the stocks that I bought made quite good profit. However, there are other stocks that lost money. Overall, it is a hard struggle to generate positive return for the entire portfolio. I believe the same happens to many people.
However, if you buy into a high dividend stock like Magnum, without lifting a finger, the comany will be delivering 7% to 8.8% return to you every year. And it is done in hard, solid cash, not some elusive paper gain.
I set a very modest target for my portfolio. If I can consistently generate 15% to 20% return per annum, I will be very satisfied. Stocks like Magnum appeal to me because it helps me to achieve half of my targeted return on recurrent basis. That really makes life easier.
Magnum traditionally traded at PER of around 15 times.
| F.Y. | Profit Attb. to SH ('000) | EPS (Cent) | PE |
|---|---|---|---|
| 2015-12-31 | 228,101 | 16.00 | 15.69 |
| 2014-12-31 | 256,538 | 18.00 | 15.17 |
| 2013-12-31 | 267,798 | 18.80 | 16.81 |
If the company can generate 17 to 18 sen EPS this year, it should trade between RM2.55 to RM2.70. Combined with let's say, 7% dividend yield, it is in good position to deliver aggragate return of 18% to 25% return per annum.
I usually don't outright ask my readers to take position. But for this particular stock, it seemed that there is limited downside and high visibility of positive return. BUY
MAGNUM (3859) - (Icon) Magnum - Strong Earning Recovery Backed By 7% to 8.8% Dividend Yield. BUY
http://klse.i3investor.com/blogs/icon8888/97599.jsp
