MAGNI (7087)
Magni-Tech Industries Bhd was incorporated in Malaysia on 12 March 1997 & listed on the 2nd Board of Bursa on 18 April 2000. It was subsequently transferred to the Main Board of Bursa on 8 April 2003. Tan Sri Dato’ Seri Tan Kok Ping is the Executive Chairman & Mr. Tan Poay Seng, the Managing Director.
The Group was initially involved in packaging business, before diversifying into apparel business. On 1 November 2006, Magni completed the acquisition of the entire equity stake in South Island Garment Sdn Bhd, an established apparel manufacturer. The diversification into apparel business has reduced the Group’s reliance on the packaging business and enhanced its earnings.
Apparel Business
For the 12 Months ended 30 April 2015, the garment business accounted for 83.2% of the Group's revenue.
The Group’s garment business is undertaken by its wholly-owned subsidiary, South Island Garment Sdn Bhd (SIG) which has its manufacturing facilities in Malaysia. SIG also operates through contract manufacturing facilities in Vietnam which are joint business collaborations with its Vietnamese partner.
With about 40 years of experience in the apparel industry, SIG has built a good reputation in this industry and is known among its customers as a reliable and consistent manufacturer of high-quality and sophisticated woven sportswear. SIG mainly exports its products to international markets such as the USA, European Countries, South America, China, Japan, Mexico, Australia and Canada.
Packaging Business
The packaging businesses are undertaken by Magni’s 3 other subsidiaries which have manufacturing facilities in Malaysia. The packaging products are typically used by the manufacturing sector, especially the electronic as well as the food, beverage, healthcare and tobacco sub-sectors. Although the packaging products are mainly sold locally, a high percentage of them are used in the packaging of manufactured products destined for the export markets.
We monitor Magni because:-
- It is currently riding on the coattails of Nike’s booming sales
- Stable, low cost production base in Vietnam
- Trans Pacific Partnership Agreement gains for “Made in Malaysia/Vietnam” clothing
- Bright long-term prospects in the apparels industry
Nike’s long-term growth record because of:-
- Plans to hit USD50bil in revenue,
- Well positioned to take advantage of an expanding global sports apparel industry and a stable growth of China sales even in the face of slowdown elsewhere
- Reporting good financial growth, consistently exceeding street views
- A beneficiary of the gain in popularity of athleisure trends
- One of the most innovative companies worldwide
- Ownership of a portfolio of globally recognized brands
- Strong marketing programmes (endorsement deals with high-profile athletes)
Magni has registered a track record of uninterrupted profits since 2007, with its performance mainly tracking Nike’s sales performance. The company delivered a 10-year revenue CAGR of 22.5% from 2005 to 2015, surviving many of the crises that impacted the world economy.
Magni has a total net cash of RM100mil, a treasury cash pile of RM0.92per share. The company has been generating healthy operating cash flows and has been in a net cash position since 2008. With this large amount of cash in hand, Magni has enough cash to fund capex for plant expansions or seek M&A opportunities.
The company has been steadily increasing DPS since 2005, even though it does not have an explicit dividend policy. Magni recently announced its final dividend of 3 per share ex-date to be set on 9th Nov 2015. With a higher earnings base going forward, we think there is still possibility the company will declare stable/higher dividends. Assuming the company kept dividend payouts above 25%, the expected dividend yield is about 2.5%.
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