MAGNUM Bhd can expect its forthcoming 3Q FY2021 to be in the red again as number forecast operators (NFOs) have not been are allowed to resume operations since June.
In this regard, Kenanga Research expects outlets closure to continue till end-September for a total period four months from its previous assumption of three months.
“The upcoming 3Q FY2021 is likely to be in the red again after the movement control order (MCO) 1.0 hit loss-making 2Q FY2020,” predicted analyst Teh Kian Yeong in a results review.
“As such, we cut FY2021 draws assumption to 117 from 132 but with unchanged ticket sales of RM12.3 mil/draw.”
With prolonged business closures having dampened ticket sales, Magnum’s 2Q FY2021 net profit declined further to RM2.1 mil from RM7.5 mil in the preceding quarter while its revenue declined 15% to RM326.5 mil from RM383.9 mil in 1Q FY2021.
Likely due to its lacklustre results, Magnum did not declare interim dividend for the second consecutive quarter. The last time it did not declared interim dividend was in 1Q FY2017.
Together with adjustment on operating expenses and non-NFO operations, Kenanga Research cut Magnum’s FY2021 earnings by 39% with net dividend per share (NDPS) trimmed proportionally based on unchanged 80% payout. However, it kept FY2022 forecasts unchanged.
All-in-all, Kenanga Research maintained its “market perform” rating on Magnum with a lower discounted cash flow (DCF)-based target price of RM2.04 (from RM2.10 previously).
“While 2021 is a miss, recovery of ticket sales is expected in 2022 once business reopens,” projected the research house. “However, we believe near-term catalysts are already mostly priced in at the moment.”
Meanwhile, Maybank IB Research maintained its “buy” rating on Magnum with a lower DCF-based target price of RM2.44 (from RM2.54 previously) as it expects NFO outlets to only reopen in November.
“With the FMCO still in effect and Magnum’s NFO outlets still shuttered, it is perhaps not surprising why Magnum decided to forego the second interim dividend payout,” opined analyst Yin Shao Yang.
“After some deliberation, we now assume that Magnum’s NFO outlets will be shut until October and only to be reopened in November after Malaysia reaches herd immunity, leading to a 65% cut in our FY2021E core net profit.”
At the close of today’s mid-day trading, Magnum was down 1 sen or 0.49% to RM2.02 with 174,000 shares traded, thus valuing the company at RM2.9 bil. – Aug 27, 2021
