KUALA LUMPUR (May 19): Analysts have trimmed their earnings forecasts for Malaysian Pacific Industries Bhd (MPI), with some cutting by as much as 53% from their previous projections, after disappointing third quarter results from the outsourced semiconductor assembly and test (Osat) firm.
A day after the release of its results that showed the group had fallen into the red with a net loss of RM17.83 million for its third quarter ended March 31, 2023 (3QFY2023) with a loss per share of 8.97, MPI’s shares lost RM2.10 or 7.55% to close at RM25.70 — its lowest in six months since November last year — with a market capitalisation of RM5.39 billion.
It was the top losing stock on Bursa Malaysia on Friday. Year to date, the stock has fallen 11% from RM28.76 on Dec 30, 2022.
This is MPI’s first quarterly loss in 10 years; the company was last in the red in 2QFY2013, when it incurred a net loss of RM1.79 million.
AmInvestment Bank made the biggest earnings projection cut among analysts, by 53%, for the financial year ending June 30, 2023 (4QFY2023) to RM78 million — which is only about 24% of the RM328.85 million that MPI made in in FY2022.
It also trimmed by 11%, its forecast FY2024 earnings for MPI to RM260.5 million, and by 3% for FY2025 to RM346.3 million.
“Our new estimates reflect more conservative sales and gross margin assumptions,” said AmInvestment Bank in its research note on Friday (May 19).
The research outfit added that MPI’s 9MFY2023 net profit of RM53 million only accounts for 32% of its previous FY2023 full-year earnings estimate, and 30% of the consensus’ estimate.
RHB Research analyst Lee Meng Horng also cut his earnings forecasts for MPI and downgraded MPI’s target price (TP) to RM25.70, from RM30.50, saying near-term weakness may continue into 4QFY2023, especially for its China operations. The research outfit had a “neutral” call for the group.
“Sluggish demand in the consumer electronic markets should continue into 4QFY2023, given the sector-wide prolonged inventory adjustments, with expectations of a gradual improvement going into 1HFY2024,” Lee said.
MPI’s 3QFY2023 revenue, which dipped to RM471.86 million from RM611.56 million a year ago, is attributable to prolonged demand weakness for consumer electronic products and the semiconductor downcycle, said Lee.
Lee is now anticipating MPI to deliver an annual net profit of RM104 million for FY2023, after cutting his earnings forecast by 47.1%, to account for the prolonged demand weakness and loss of economies of scale.
Unattractive valuation
Bloomberg data showed that the average 12-month TP for MPI, rated by analysts, is RM24.58 — 4.4% lower than MPI’s closing price of RM25.70 on Friday — with the lowest TP at RM20.
Of the eight analysts tracking MPI, four have put the stock on “hold”, while the remaining four have called for a “sell”.
From a valuation perspective, AmInvestment Bank said the stock is trading at an unattractive valuation of 21 times FY2024 price-earnings compared to its five-year historical average of 18 times, while dividend yields are unexciting at just 1%. The research house kept its “hold” call for the stock, while lowering its fair value to RM25.10 from RM28.10.
MPI declared a second interim single tier dividend of 25 sen per share, with the release of its 3QFY2023 results — the same amount it announced a year ago — bringing its year-to-date dividend per share to 35 sen.
MPI posted a net loss of RM17.83 million in 3QFY2023, against a net profit of RM81.36 million a year ago, as quarterly revenue declined 22.8% to RM471.86 million, from RM611.56 million.
The dismal quarterly results dragged its 9MFY2023 net profit to RM53.2 million, down 78.6% from RM248.37 million in 9MFY2022. Revenue was down 13.4% to RM1.56 billion, from RM1.8 billion previously.