KUALA LUMPUR (Feb 23): Shares in MSM Malaysia Holdings Bhd climbed on Friday, following improved fourth-quarter earnings, with analysts expecting the sugar refiner to remain in the black, on the back of higher export sales volumes to Asia-Pacific countries.
This is attributed to the global sugar deficit resulting from the El Niño climate phenomenon and the ongoing food crisis in Africa.
MSM rose five sen or 2.13% to settle at RM2.40 at Friday's noon break, after some 3.78 million shares changed hands, giving it a market capitalisation of RM1.69 billion. The FBM KLCI benchmark index, meanwhile, rose 0.99%.
Among two analysts covering the stock, only MIDF Amanah Investment Bank Bhd raised its target price (TP) for MSM.
The research house lifted its TP by 102% to RM3.43 (from RM1.70), based on forecast earnings per share of 31.1 sen for the financial year ending Dec 31, 2024 (FY2024).
The valuation is pegged at a price-earnings ratio (PER) of 11 times, representing a 10% premium to the international sector's PER of 10 times, said the research house in a note.
MIDF viewed that MSM's outlook is showing signs of stabilisation, attributing the improvement to post-rectification efforts at the MSM Johor refinery, which are expected to result in a more favourable utilisation rate in the upcoming quarters.
“On top of that, the quantum of increased average selling prices (ASPs) and higher sales volumes to Asia-Pacific countries would eventually be able to mitigate the elevated sugar cost,” MIDF added.
MSM posted a net profit of RM42.87 million for the fourth quarter ended Dec 31, 2023 (4QFY2023), after eight consecutive quarters of loss-making, against a net loss of RM44.16 million a year earlier, thanks to RM48 million in special incentives from the government.
Quarterly revenue climbed to an all-time high of RM949.88 million, up 40.15% from RM677.74 million a year earlier, on higher sales volumes and ASPs, as well as the special incentives.
It is understood that for November and December 2023, MSM received RM1,000 per tonne in special incentives for coarse grain sugar and fine grain sugar.
Sugar prices in Malaysia are capped at RM2.85 per kg for coarse sugar, and RM2.95 per kg for refined sugar.