MPI (3867) - Malaysian Pacific Industries - Sequential improvement
Target RM7.50 (Stock Rating: ADD)
MPI’s 1HFY15 core net profit came in above expectations at 55%/57% of our/consensus full-year estimates. Core net profit grew 36% yoy, driven by higher contributions from smartphone packages, lower material costs, and the stronger USD vs. MYR. We raise our FY15-17 EPS by 4-5% for the stronger contribution from higher margin packages, but keep our Add rating, with an unchanged target price based on 13.6x CY16 P/E, 1 s.d. above its 1-yr hist. mean (vs. 2-yr hist. mean of 14.3x previously to better reflect the recent stock performance following earnings recovery in FY14). MPI is our top sector pick due to its high operating efficiency and better traction in higher margin packages. Stronger contributions from its communications and automotive segments, higher dividend payouts and M&A activities are rerating catalysts.
1HFY15 review
Revenue grew by 2.9% yoy from RM647m to RM666m in 1HFY15 on stronger contributions from the smartphone and tablet (S&T) segment, especially from its “x3” ultra-thin Micro Leadframe Packages (MLP), and the strengthening USD vs. MYR. Its EBITDA margin also increased by 1.8% pts from 22.6% to 24.4% on the back of lower material costs and better sales. MPI recorded a higher core net profit of RM44.5m in 1HFY15 vs. RM32.7m in 1HFY14.
An array of growth drivers
There we no surprises from the results briefing, with management reiterated its strategy on product offerings geared towards the high density, leaded and test segments. Apart from that, we were encouraged to learn that MPI is getting better traction from customers servicing the Chinese smartphone makers. Overall, management is guiding for a 0-5% decline in 3QFY15 revenue, in line with our expectations given the seasonal weakness in demand and shorter operating period. However, we expect MPI’s performance to rebound in 4QFY15 driven by the pick-up in demand for its automotive sensors and x3 packages. Moreover, we like its strategy of diversifying beyond smartphones and growing into the Internet-of-Things ecosystem following its venture into copper-clip MLP for cloud server applications and MEMS test service.
Maintain Add
Accumulate MPI. While the stock is up 21% YTD, we still see decent upside due to good earnings growth (FY14-17 CAGR of 27.3%) to support valuations.
Source: CIMB Daybreak - 23 January 2015
Target RM7.50 (Stock Rating: ADD)
MPI’s 1HFY15 core net profit came in above expectations at 55%/57% of our/consensus full-year estimates. Core net profit grew 36% yoy, driven by higher contributions from smartphone packages, lower material costs, and the stronger USD vs. MYR. We raise our FY15-17 EPS by 4-5% for the stronger contribution from higher margin packages, but keep our Add rating, with an unchanged target price based on 13.6x CY16 P/E, 1 s.d. above its 1-yr hist. mean (vs. 2-yr hist. mean of 14.3x previously to better reflect the recent stock performance following earnings recovery in FY14). MPI is our top sector pick due to its high operating efficiency and better traction in higher margin packages. Stronger contributions from its communications and automotive segments, higher dividend payouts and M&A activities are rerating catalysts.
1HFY15 review
Revenue grew by 2.9% yoy from RM647m to RM666m in 1HFY15 on stronger contributions from the smartphone and tablet (S&T) segment, especially from its “x3” ultra-thin Micro Leadframe Packages (MLP), and the strengthening USD vs. MYR. Its EBITDA margin also increased by 1.8% pts from 22.6% to 24.4% on the back of lower material costs and better sales. MPI recorded a higher core net profit of RM44.5m in 1HFY15 vs. RM32.7m in 1HFY14.
An array of growth drivers
There we no surprises from the results briefing, with management reiterated its strategy on product offerings geared towards the high density, leaded and test segments. Apart from that, we were encouraged to learn that MPI is getting better traction from customers servicing the Chinese smartphone makers. Overall, management is guiding for a 0-5% decline in 3QFY15 revenue, in line with our expectations given the seasonal weakness in demand and shorter operating period. However, we expect MPI’s performance to rebound in 4QFY15 driven by the pick-up in demand for its automotive sensors and x3 packages. Moreover, we like its strategy of diversifying beyond smartphones and growing into the Internet-of-Things ecosystem following its venture into copper-clip MLP for cloud server applications and MEMS test service.
Maintain Add
Accumulate MPI. While the stock is up 21% YTD, we still see decent upside due to good earnings growth (FY14-17 CAGR of 27.3%) to support valuations.
Source: CIMB Daybreak - 23 January 2015
