SUPERMX (7106) : Supermax Corp - Results continue to be weak
Target RM2.38 (Stock Rating: HOLD)
9MFY14’s net profit came in below our (67% of FY14 forecast) and consensus’ estimates (64%). Weak associate contribution, forex losses and higher costs incurred for its new and Alor Gajah factories dragged down its 3Q numbers. 9MFY14’s revenue was impacted by the weak 1H sales volume, while net profit was dragged down by weak associate contribution, forex losses and a higher effective tax rate despite lower operating expenses. We cut our FY14-16 EPS by 12-18%. This lowers our target price (12.4x P/E, 30% discount to Hartalega) which we roll over to 2016. We downgrade the stock to Hold from Add due to the underperformance and lack of transparency. Supermax declared an interim dividend of 2sen/share, in line with our forecast. We prefer Kossan.
3Q’s net profit remains weak
Supermax’s 9MFY14 revenue dropped 19.9% while net profit declined by 21.7% yoy. The top line was mainly impacted by its 1HFY14 results in which revenue dropped 27.7% as the group was affected by (i) the temporary loss of production caused by the fire at its Alor Gajah plant in 4Q 2o13, and (ii) lower selling prices. In 3QFY14, Supermax’s revenue only declined by 2.2% which we believe was mainly due to the lower selling prices as natural rubber prices declined 18% yoy while nitrile prices were almost flattish. Despite the much better 3Q top line performance yoy as compared to 1H, net profit continued to decline substantially (-22.3% yoy) mainly due to forex losses totalling RM5.9m. Excluding this, 3QFY14 net profit declined by 5.8% yoy due to (i) the lower associate profit which dropped by 38.5% yoy to RM2.4m, (ii) stocking up cost relating to new factories and resumption of full running of Alor Gajah plant, and (iii) higher effective tax rate (+5% pts yoy). The continued poor net profit performance in 3Q caused 9MFY14 net profit to drop by 21.7% which was also impacted by the higher effective tax rate (+4.9% pts yoy) and lower associate profit (-49.7% yoy) in addition to the poor sales volume in 1H. 9MFY14 EBIT margin improved 1.1% pts yoy due to the better operating efficiency.
Qoq net profit impacted by higher cost and forex loss
Revenue increased 16.9% qoq due to the resumption of full operations at the Alor Gajah plant, while net profit only rose by 3.9% as the group incurred forex losses and stocking-up costs for its new factories and Alor Gajah plant.
Source: CIMB Daybreak - 10 November 2014
Target RM2.38 (Stock Rating: HOLD)
9MFY14’s net profit came in below our (67% of FY14 forecast) and consensus’ estimates (64%). Weak associate contribution, forex losses and higher costs incurred for its new and Alor Gajah factories dragged down its 3Q numbers. 9MFY14’s revenue was impacted by the weak 1H sales volume, while net profit was dragged down by weak associate contribution, forex losses and a higher effective tax rate despite lower operating expenses. We cut our FY14-16 EPS by 12-18%. This lowers our target price (12.4x P/E, 30% discount to Hartalega) which we roll over to 2016. We downgrade the stock to Hold from Add due to the underperformance and lack of transparency. Supermax declared an interim dividend of 2sen/share, in line with our forecast. We prefer Kossan.
3Q’s net profit remains weak
Supermax’s 9MFY14 revenue dropped 19.9% while net profit declined by 21.7% yoy. The top line was mainly impacted by its 1HFY14 results in which revenue dropped 27.7% as the group was affected by (i) the temporary loss of production caused by the fire at its Alor Gajah plant in 4Q 2o13, and (ii) lower selling prices. In 3QFY14, Supermax’s revenue only declined by 2.2% which we believe was mainly due to the lower selling prices as natural rubber prices declined 18% yoy while nitrile prices were almost flattish. Despite the much better 3Q top line performance yoy as compared to 1H, net profit continued to decline substantially (-22.3% yoy) mainly due to forex losses totalling RM5.9m. Excluding this, 3QFY14 net profit declined by 5.8% yoy due to (i) the lower associate profit which dropped by 38.5% yoy to RM2.4m, (ii) stocking up cost relating to new factories and resumption of full running of Alor Gajah plant, and (iii) higher effective tax rate (+5% pts yoy). The continued poor net profit performance in 3Q caused 9MFY14 net profit to drop by 21.7% which was also impacted by the higher effective tax rate (+4.9% pts yoy) and lower associate profit (-49.7% yoy) in addition to the poor sales volume in 1H. 9MFY14 EBIT margin improved 1.1% pts yoy due to the better operating efficiency.
Qoq net profit impacted by higher cost and forex loss
Revenue increased 16.9% qoq due to the resumption of full operations at the Alor Gajah plant, while net profit only rose by 3.9% as the group incurred forex losses and stocking-up costs for its new factories and Alor Gajah plant.
Source: CIMB Daybreak - 10 November 2014