Magni-Tech Industries Bhd
MAGNI (7087) MAGNI-TECH INDUSTRIES BHD
MAGNI-Tech, an apparels manufacturer that is a major supplier to global sportswear leader Nike, is an undiscovered, undervalued stock. The stock trades at a low 12-month trailing P/E ratio (excluding cash) of only 5.1 times, with net cash accounting for one-third of its stock price.
Established in 1997, Magni started as a manufacturer of packaging materials before diversifying into apparels with the acquisition of South Island Garment Sdn Bhd (SIG) in 2006. The company has manufacturing facilities in Malaysia and Vietnam.
For FYE April 2014, garments accounted for 81.5% of the company’s total sales with the remaining 18.5% from packaging.
SIG derives most of its sales from Nike, with business relationship dating back to 1985. In 2006, SIG was appointed by Nike as one of its tier-1 woven manufacturers, due to its consistent performance in on-time delivery and high quality apparels. With the appointment, Nike is committed to prioritising the production capacity offered by SIG as well as other tier-1 manufacturers.
Magni has a very strong balance sheet. As of 1Q2015, it had net cash of RM103.6 million or 95 sen per share. Although net profit margin was only 6.4% in FY2014, ROE was an impressive 19.0%. From FY2010 to FY2014, sales and pre-tax profit grew by a compounded annual growth rate of 14.7% and 26.3% respectively, reaching RM651.3 million and RM55.4 million, respectively.
The stock is trading at a trailing 12-month P/E ratio of 7.5 times and price-to-book ratio of 1.3 times. Stripping out the cash, the underlying P/E ratio is only 5.1 times. Dividend yield is attractive at 4.4%, and the company can afford to pay out much more given its large cash pile. The stock is presently under the radar of investors with coverage by only one local research house.
Notably, directors’ remuneration at Magni is considered excessive, at 15.9% of pre-tax profit in FY2014, down from 19.1% a year ago.
http://www.theedgemarkets.com
Hot Stock
Magni-tech climbs 8.3% after reporting higher earnings
KUALA LUMPUR (Mar 17): Apparels manufacturer Magni-tech Industries Bhd (
Financial Dashboard) jumped as much as 8.25% or 24 sen today after it reported better financial results yesterday.
Financial Dashboard) jumped as much as 8.25% or 24 sen today after it reported better financial results yesterday.
The counter closed at six-month high RM3.09 today, up 18 sen or 6.2% with 1.12 million shares changing hands, giving it a market capitalisation of RM335.23 million. It was one of the top gainers today.
Magni-Tech Industries (fundamental: 2.8; valuation: 2.4) saw its net profit rose nearly 18% to RM17.49 million in the third quarter ended Jan 31, 2015 (3QFY15), compared to RM14.84 million a year earlier, due to higher revenue and other operating income. The company also proposed dividend per share of five sen for the quarter.
For the nine months ended Jan 31 (9MFY15), Magni-Tech posted a net profit of RM35.58 million — an increase of 6.33%.
An analyst told theedgemarkets.com that the company’s earnings had fared well although the increase in its net profit might not be a jump, in view of the uncertainties on the global economy. He believed the better financial performance might have lent support to share price and trading volume today.
“Their (Magni-tech) results are considered good, after taking into account the uncertainties in the global economy. At least the company is still growing even though the outlook of the apparels industry looks bleak,” he said, adding that the profit margin of the apparel business is always thin.
Magni-tech was also chosen by Insider Asia as an “undiscovered, undervalued” stock last October when the stock was trading at RM2.94 then.
Insider Asia said the stock was at that time trading at a low 12-month trailing P/E ratio (excluding cash) of only 5.1 times, with net cash accounting for one-third of its stock price.
The apparel manufacturer is also a major supplier to global sportswear leader Nike.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
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