Good to hold MSM Malaysia shares: MIDF

Shares in Malaysia's biggest sugar refiner MSM Malaysia Holdings Bhd are a good bet to hold if the economy goes into a downturn due to its monopoly in the industry.

"Sugar is a staple food in Malaysia. So, the demand will be consistent even during a downturn and given that they are the largest refiner here, there is minimal competition in the industry," said an analyst with MIDF Research.

MSM Malaysia, which controls more than half of the local sugar market, with production capacity of 1.1 million was listed on Bursa Malaysia on June 28.

The company has notified before its intention to pay 50 per cent net profit as dividend, which shareholders stand to gain.

"We are foreseeing a year-on-year dividend yield of 4.7 per cent," the analyst told Bernama.

Yesterday, the company announced that its pre-tax profit jumped 43 per cent to RM97.9 million in its second quarter mainly due to fair value gains in derivatives by RM30.3 million.

The group recorded RM68.5 million in the same period last year.

In a filing to Bursa Malaysia, the company said revenue, however, dwindled slightly to RM97.918 million from RM68.503 million in 2010.

MSM Malaysia Holdings said the lower revenue was due to dismal domestic sales in the second quarter despite higher average price.

No dividend was announced yesterday.

MIDF Research has recommended a neutral call with a higher target price of RM5.25 per share from previous RM4.20 per share.

At 3.50pm, the shares stood at RM5.44, down two sen. -- BERNAM