Malaysian Pacific Industries Bhd
MPI (Fundamental: 1.8/3, Valuation: 2/3) is charting a strong recovery, after falling into the red in FYJune2012, riding on the current uptrend in the semiconductor sector, which is underpinned by robust demand for smartphones and tablets.
MPI is among the world’s six largest semiconductor sub-contract assembly houses, catering mainly to the communications and automotive industries. It is the top volume producer globally for the ultra-thin flagship product, MLP (Micro Leadframe Packages), which are used in smartphones. The bulk of products are exported, to Asia, the USA and Europe. Net profit for 9MFY2015 more than doubled y-y to RM74.1 million, on the back of a 4.9% increase in revenue. As a guide, net profit totaled RM45.1 million for the whole of FY2014. The margin improvement can be attributed, in part, to higher utilisation, strengthening of the US dollar against the ringgit and better product mix.
Management is upbeat on the outlook for its new products, for smartphones and tablets (including the Multilevel Interconnect System packaging) as well as automotive divisions (impact sensors). It is believed the latter is holding relatively low inventory, which bodes well come the next replenishment cycle. The company intends to expand the automotive division, which will help offset seasonal weakness in the smartphone and tablet business. Having said that, the latter remains its key focus — where it will continue efforts to build market share. MPI currently sells to the industry’s top 2 leading smartphone brands.
In line with the stronger earnings and cashflow from operations, MPI is now in a net cash position, of RM63 million. Accordingly, the company has raised its dividends, from 15 sen per share in FY2014 to 20 sen in FY2015, so far. That translates into a net yield of roughly 2.9%. The stock is trading at modest trailing 12-month P/E of 16 times — relative to earnings growth of 75.7% over the same period.
This article first appeared in The Edge Financial Daily, on July 3, 2015.