MSM Overcomes a Difficult Period - Analyzer

 CGS-CIMB Research has renewed its suggestion for MSM Malaysia Holdings Bhd to "hold" rather than "reduce" before the company was expected to experience positive revenue growth prospects.

However, the investigation firm said the sugar manufacturer's company was facing an uncertain leadership situation following the dismissal of Datuk Khairil Anuar Aziz from the Chief Executive Officer (CEO) and the losses incurred by the Johor refinery.

Overnight, the company announced a net loss for the third term ending September 30, 2020 (3QFY20) of RM71.21 million along with an increase in sales margins and foreign export products when total revenues increased to RM594.55 million from RM531.69 million last year.

"The main net loss for the first 9 months ended September 30, 2020 (9MFY20) of RM43 million is low compared to our forecast of RM64 million for a full financial year following better refining margins," said CGS-CIMB analyst Ivy Ng Lee Fang. and Nagulan Ravi on her notes today.

The analysts said they expected MSM to record lower losses for 4QFY20 along with higher sales numbers and lower operating costs following the closure of the refinery at Perlis and the elimination of biological assets.

“The company repeated its strategy of 'swapping directions' by pooling expenditures at the Johor refinery, lowering the cost of expenses and increasing the average selling price (ASP) by removing the first layer of wholesalers instead of the supply chain.

"Our main concern is an increase in the price of raw sugar to US $ 0.14 / lbs rather than a low face value in 2020 against US $ 0.99 / lbs which may negatively impact MSM's profit margins for local refined sugar products in 2021F and company governance," said the analysts. .

The analyzers added, they perpetuated the target price (TP) of 55 cents.

At midday, MSM's shares fell by one cent or 1.85% to 53 cents, which made the company's market capitalization around RM369.06 million.