Hot Stock South Malaysia Industries rises 30% after huge 1Q y-o-y earnings jump

by **Cals** Wed 25 May 2016, 01:33

Hot Stock

[size=28]South Malaysia Industries rises 30% after huge 1Q y-o-y earnings jump

By Surin Murugiah / theedgemarkets.com | May 24, 2016 : 10:58 AM MYT

KUALA LUMPUR (May 24): Small-cap South Malaysia Industries Bhd’s biggest quarterly profit in nearly six years propelled the property developer and wire product manufacturer to a six-month high, and put the counter on the most active rank this morning.

At 10:28 am, South Malaysia Industries shares rose three sen or 22.22% to 16.5 sen, after rising to as high as 17.5 sen. The counter’s trading volume of 4.77 million made it the 18^th most traded entity on Bursa Malaysia then.

South Malaysia Industries yesterday announced it made a net profit of RM1.46 million in the first quarter ended Mar 31, 2016 (1QFY16). Although its revenue shrank by 12.69% year-on-year to RM19.996 million, the quarter’s net earnings were a vast improvement from 1QFY15’s RM9,000.

Its earnings per share was 0.7 sen in the quarter, versus a negligible figure last year. Up to the 1QFY16, its net asset per share was 68 sen.

The company attributed the higher profit to its property development segment recognising more profit in the quarter from a year earlier, while lower operating expenses offset the loss of its manufacturing and trading division’s lower sales.

A one-off effect of sorts last year due to customers stocking up before the goods and services tax (GST) boosted South Malaysia Industries’ manufacturing and trading division’s top-line last year, the company said.

On the group level, South Malaysia Industries’ operating profit in 1QFY16 of RM1.96 million was 2.86 times greater than the previous corresponding quarter’s. Its operating expenses fell by 23.84% year-on-year to RM17.52 million.

The company has either been making losses or quarterly profit in the thousands only. The last time it made a profit higher than 1QFY16’s was in 2QFY10, where it made one-off gains of selling assets to derive a net income of RM9.28 million.

South Malaysia Industries said in the notes accompanying its 1QFY16’s income statement that it expects its financials to improve with ongoing property projects undertaken in 2016. Its manufacturing division’s operating environment in the year meanwhile will be similar to last year’s, where it faces intense competition and volatile raw materials prices.

“Hence, its focus will be on improving operating margin and retaining core customers,” South Malaysia Industries said.

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