It said on Monday Magna Prima (Outperform; target price: RM1.60) reported 1H17 results which beat its estimates thanks to higher-than-expected pre-tax margin of 31% versus its forecast of 10% as well as higher recognition of unbilled sales.
Kenanga Research said Magna Prima’s higher unbilled sales turned 2Q17 earnings profitable at RM6mil from core loss of RM1.4mil in 1Q17.
“However, upcoming 3Q17 earnings could be softer. With this strong set of 2Q17 results, we raised FY17/FY18E by 10%/17%. Upgrade the stock to Outperform from Market Perform with unchanged target price of RM1.60,” it said.
As for the auto sector, it pointed out the Malaysian Automotive Association (MAA) released total industry volume (TIV) statistics for July which saw car sales dipping 3% on-month to 48,553 units owing to post Hari Raya holidays as well as technical glitches in the “e-daftar” system which affected registration process of vehicles.
Year-to-date, the TIV for January-July came in stronger by 5% at 333,010 which is on track to meet the research house’s 2017 assumption of 590,000.
“Given lack of re-rating catalyst, we maintain Underweight on the auto sector,” it said.
Kenanga Research said on the other hand, Genting Plantations’s (Market Perform; TP: RM11) announcement that that it had bought 14,7000 ha of plantation in Kalimantan Selatan, Indonesia for US$95mil which came as no surprises as it had previously noted its interest in well-priced land bank.
“We find the acquisition price is lower than average. We see neutral short-term impact given minimal earnings contribution but a long-term positive on yield expansion.
“FY17/FY18E tweaked up by 0%/1% with lower target price to RM11.00 from RM12.40 as we updated sum-of-parts to include retail segment,” it said.
The research house said lastly, it came away with its positive conviction reaffirmed on MPI (OP; TP: RM15.70) post result briefing, premising on the group’s new products positioning, strategic exposure in different segments as well as the meaningful earnings contribution from its automotive segment which will anchor its FY18 top-line growth of 5.5%-7.5% in US$ terms.