Company : Magni Tech Industries Berhad
Business :
Manufacturing
of garment, flexible plastic packaging and corrugated packaging. OEM for famous
brand of Nike which is more than 90% of their apparel business. The business split between
garment to packaging is approximately 92% to 8%. Garment segment operates in Malaysia and
Vietnam. The company has been selected as Forbes Asia’s BEST UNDER A BILLION list 2020
in Asia Pacific region. Well done management!
Note : Another OEM for NIKE is Prolexus Bhd in Malaysia.
It is super boring to read their annual reports because they recycle most of the content even the cover page! Come on Magni, cannot afford to pay a designer meh?
Fundamental :
Company has zero debt for many years and cash pile is growing every year. The cash at bank is RM83 million and other investment is RM 257 million. Super strong cash flow from operation and the dividen & interest received during last quarter report was RM9.35 million. Therefore, the company has no problem paying dividen every quarter.
Revenue for FY 2021 is flat at RM 1.22 billion and profit for the FY is slightly increase to RM127 million which is not bad considered challenging operation environment during pandemic situation.
Q4 Result
Prospect:
It is still very challenging as big sport events like Tokyo Olypmic are carried out without spectators. However, US spending seems very encouraging and we may see improvement on their sales. Their business is really depending on NIKE as single biggest client. Hence, NIKE business performance is a possible indirect indicator for Magni-Tech, although NIKE has many OEM factories. See link below:
https://news.nike.com/news/nike-inc-reports-fiscal-2021-fourth-quarter-and-full-year-results
- Fourth quarter reported revenues were $12.3
billion, up 96 percent compared to prior year and increasing 21 percent
compared to the fourth quarter of 2019.
https://news.nike.com/news/nike-inc-reports-fiscal-2021-third-quarter-results
- Third quarter reported revenues were $10.4
billion, up 3 percent compared to prior year and down 1 percent on a
currency-neutral basis* led by Greater China reported revenue growth of 51
percent.
Corrugated packaging contributes very small portion to the overall revenue. The factory are not allowed to operate so there will be impact on the sales in coming quarter plus labour shortage in Malaysia. However, Vietnam operation may help to offset (hopefully Vietnam plant is not under lock down?).
Expansion plan:
No information on capacity expansion. It is also not clear the production capacity split between Malaysia and Vietnam operation.
My view on share price:
This company is good to collect when market crash but won’t happen easily. Since its bonus issue in 2019, price does not fluctuate much except the COVID sell down in March 2020. Price is moving at the range of RM 2.12 – RM2.50. Potential upside is limited. If wish to buy for its dividen then probably good to enter at RM2.12 or lower.
Conservative
forecast of EPS is 23 cents so PE is 9.78 at RM2.25 (16 July 2021). Nothing
surprise.
|
Q1 |
Q2 |
Q3 |
Q4 |
Total |
|
5 |
5 |
6 |
7 |
23 |
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