KUALA LUMPUR (Feb 26): MSM Malaysia Holdings Bhd was up 18.13% this morning after reporting a narrower net loss for the financial year ended Dec 31, 2020 (FY20).
The stock rose by 15 sen to RM1.01 sen, with 71.37 million shares done, giving it a market capitalisation of RM695.95 million.
Yesterday, the sugar producer said its net loss for FY20 narrowed to RM71.23 million from RM299.77 million a year earlier. This was supported by its revenue, which rose to RM2.18 billion from RM2.01 billion a year earlier.
It also posted a net profit of RM56.24 million for the fourth quarter ended Dec 31, 2020 (4QFY20), compared to a net loss of RM40.28 million a year ago, due to a higher overall margin and lower finance cost.
This was a better-than-expected performance, said CGS-CIMB Research in a note today, which was due to a better sugar refining margin following the expiry of high-priced raw sugar contracts at the end of 2019, higher export premiums, stronger export volume and lower refining cost.
CGS-CIMB upgraded the stock to an “add” call from a “hold” previously, with a higher target price (TP) of RM1.22 from 55 sen earlier, after significantly raising its FY21 and FY22 earnings forecasts to reflect higher refining margins and in line with the expectations that MSM will return to profitability.
At the results briefing, MSM revealed several positive earnings indicators, said CGS-CIMB, which include that export premiums had stayed healthy year to date and that it had locked in 65% of its targeted export sales volume in the first half of 2021 (1H21) at a favourable price premium.
Additionally, refining cost is expected to trend lower due to lower gas prices and yield improvement at its Johor refinery. MSM had also hedged 85% of its FY21 raw sugar requirement for domestic sales at 10-13 US cents (40.5 sen to 52.64 sen) per pound, and it had raised the price premium for industry segment players by RM50 to RM150 per tonne in 2021.