MPI slips to six-month low after disappointing quarter result

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KUALA LUMPUR (Jan 30): Malaysian Pacific Industries Bhd’s (MPI) came under selling pressure today, sliding to its six-month low after announcing a disappointing set of earnings for the second quarter ended Dec 31, 2017 (2QFY18).

The stock fell 74 sen, or 6.58%, to close at RM10.50 with 1.99 million shares traded. MPI's share price has declined 16.8%,or RM2.12, year to date.

Yesterday, MPI said its net profit for 2QFY18 declined 25% to RM41.2 million, from RM54.98 million a year ago, no thanks to lower overseas revenue. Quarterly revenue dropped 1.5% to RM395.25 million from RM401.41 million.

Apart from weaker contribution from the overseas segment, MPI also blamed the drop in its bottomline for the quarter and year under review to higher material costs arising from a commodity price surge and unfavourable foreign exchange differences.

For the first six months of FY18 (1HFY18), MPI said net profit was down 18% to RM77.44 million from RM94.7 million in 1HFY17, while revenue gained 3% to come in at RM782.89 million versus RM759.42 million a year earlier.

Kenanga Research’s Desmond Chong said in a note today that the research firm is maintaining its cautious stance on MPI for now, having considered rising material costs, the weakening USD/MYR as well as longer gestation period for MPI’s product rationalisation exercise.

“Though the overall industry continued to show improvement with the global semiconductor sales in November 2017 increasing by 21.5%, marking the 16th consecutive year-on-year growth, we noticed the growth momentum is already moderating, mimicking the movement of the last up-cycle which lasted 26 months back then from May 2013 till June 2015,” Chong said.

Kenanga Research is maintaining its ‘market perform’ call on MPI, with an unchanged target price of RM11.30.

Similarly, AmInvestment Bank’s Lavis Chong said the group is badly affected by the weak US dollar and rising commodity prices, noting that from end-3QFY17, the USD/MYR has depreciated 12%, while copper and gold prices have increased by 21% and 7% respectively. Copper and gold are the raw materials that semiconductor firms need.

“MPI's attempts to hedge were to little avail, as the group has only managed to hedge 25% to 30% of its net US dollar exposure, and at less-than-favourable USD/MYR rates of below 4.00,” Chong said. The research firm is keeping its ‘hold’ call on MPI, with a fair value of RM10.84.

MPI is not the only semiconductor player to see its share price on the decline. Inari Amertron Bhd, Vitrox Corp Bhd, Globetronics Technology Bhd and Unisem (M) Bhd have all settled lower today.

Vitrox traded 2.3% or 15 sen lower to end the day at RM6.32, with a market value of RM2.99 billion. Unisem settled down 2% or six sen at RM3.02 — the lowest it has gone so far this year — valuing the group at RM2.17 billion.

Inari — whose share price has been on the uptrend in the last 12 months and which announced a proposed one-for-two bonus issuance yesterday — took a respite, closing 3.5% or 12 sen lower at RM3.30, for a market capitalisation of RM6.8 billion. The stock had more than doubled from RM1.71 on Jan 31, 2017 to a record high of RM3.80 earlier this month.

Meanwhile, Globetronics shares also dropped to its lowest level so far this month. The stock closed 5% or 3.3 sen lower at RM6.32, for a market value of RM1.8 billion.