PETALING JAYA: MSM Malaysia Holdings Bhd
is expected to maintain its profitability this year, buoyed by several factors.
According to BIMB Securities Research, MSM will be able to sustain its profitability, driven by a higher target of blended utilisation factor (UF) of 65% in financial year 2025 (FY25) versus 53% in FY24.
It would also experience an increase in target export volume to 360,000 tonnes in FY25 from 240,000 tonnes in FY24 with China and Asean countries driving the sales.
“We believe that the government incentives received for the wholesale segment will remain until the price increase mechanism is revised.
“However, we are cautious on the downside risks of any sudden fluctuations in raw sugar price and currency as MSM imports 100% of its raw sugar requirements,” the research house added.
MSM’s FY24 net profit of RM31.3mil made up 113% and 92% of the research house’s and consensus expectations, respectively.
“We deem this as within our estimate given the low base comparison,” it said.
In FY24, MSM’s revenue surged by 14.7% and the company managed to turnaround its bottom line from a net loss of RM49.9mil in FY23 to a net profit of RM31.3mil in FY24, attributed to higher total sales volume and an increased average selling price, thanks to the government incentive received for the wholesale segment.
BIMB is maintaining its “hold” call on MSM with a higher target price of RM1.50 from RM1.10.
Meanwhile, MIDF Research said given the renewed outlook for MSM, it was upgrading its call to a “trading buy” with a new target price of RM1.55.
“Trading buy” refers to when the stock price is expected to rise by more than 10% within three months after the rating has been assigned due to positive news flow.
In terms of earnings, the research house said they came in below its and the consensus estimate.
“We revised our earnings lower for FY25 to FY26 by 18% year-on-year (y-o-y) and 19% y-o-y respectively.
“The main challenge remains hedging activities particularly in raw sugar costs, which involve foreign exchange rates.
“The reduction in earnings estimates takes into consideration the volatility of dollar and ringgit exchange rate of RM4.57 to RM4.48, respectively.
“The group’s UF is estimated to stand at 57% and 60% for the said period, as we take a conservative stance against competitive price war between the approved permits players,” it noted.
