Optimistic outlook for MPI

  • Business
  • Saturday, 01 Mar 2003



Malaysian Pacific Industries Bhd (MPI), is expected to pick up steam in the second half ending June 30 2003, after a dismal performance in its second quarter ended Dec 31 last year. 

The growth forecast for the manufacturer of semiconductor devices, integrated circuits, electronic components and lead frames, is expected to come from a contract which to date is pending announcement. 

At an analyst briefing, management had said that the yet to be announced assembly and test contract, once inked, would require work to commence immediately, and lead to a 10 per cent increase in revenue per quarter. The new contract, as a plus point, is also not expected to require much capital expenditure. 

Other reasons for an optimistic outlook on MPI include the ongoing construction works on a new plant in Suzhou, China, which is expected to be completed sometime in October this year, and the surge in the company’s Micro Leadframe Package sales. 

In the last financial quarter, from October to December last year, sales of Micro Leadframe Packages, increased to some six per cent of assembly and test revenue, from only one per cent of revenue a year ago.  

MPI is a major producer of Micro Leadframe Packages globally, and has only about three other significant competitors at present. 

Other contributions to growth patterns include the growth in mobile phone sales as reiterated by companies such as Nokia. Up until September last year there were some 8.5 million mobile phone users, this year a growth of some 18 per cent is forecasted. 

MPI's largest customer, France-based ST Mictroelectronics, released results late January, beating earnings expectations and forecasting brighter prospects in the industry, meaning an expected boom in business for the local company as well. 

MPI's fortunes have been slowly turning around with the first half of the financial year registering profits, albeit only in the region of RM7.63 million, but nevertheless an improvement from the net loss of RM28.18 million in the same period the previous financial year. 

For the same period the group's revenue increased by 19.68 per cent to RM430.27 million from RM359.51 million on the back of an improvement in total utilisation rate which went up to some 65 per cent. 

Multex Global Estimates forecasts the company making a net profit of RM30 million on the back of a RM900 million turnover for the financial year ending June 30 2003, bouncing back some190 per cent from a net loss of RM33.26 million from a RM769 million turnover, the preceding financial year. 

Quarter-on-quarter, however, MPI's performance has shown a large contraction, by some 91 per cent in net profits, from RM7 million in the first financial quarter to a mere RM629,000 in the second, causing some concern among the analysts fraternity covering the stock.  

The decline was attributed to the two festivals, Hari Raya and Christmas, and the imposition of higher effective tax rates due to deferred tax in the previous years. 

Not many analysts are convinced.  

Some have downgraded the stock in response to the weak second quarter performance, suggesting that the company's future is uncertain. 

An analysts from a local research house says that the uncertain future is brought about by the company's contracts which are largely on a spot order basis, with most contracts lasting only between two and four months. 

MPI, despite the dismal second quarter performance has declared an interim dividend of 15 sen, ex-date on Feb 18 and payable on Mar 6 this year. 

The company's shares closed at RM10.90 on Thursday, after hitting its 52-week high of RM22 on Apr 30 2002 and its low of RM10.20 on Oct 15 the same year. 

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