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MFCB (3069) MEGA FIRST CORP BHD 3Q net profit surges by 512% to RM90m

KUALA LUMPUR (Nov 19): Mega First Corp Bhd saw its net profit in the third quarter ended Sept 30, 2020 (3QFY20) rise by 512.08% on better earnings from both its resources, and packaging and labels divisions.

In a bourse filing, the group announced that its net profit increased to RM89.5 million from RM14.62 million a year prior. Quarterly revenue increased by 68.28% at RM211.21 million from RM125.51 million a year prior.

As a result, earnings per share (EPS) rose to 19.95 sen from 3.66 sen in 3QFY19.

Mega First explained that its resources division saw a 7.8% increase in lime product sales volume following orders from new customers offsetting weaker demand from existing customers.

The packaging and label division also registered higher earnings on greater orders of flexible plastic and paper packaging products from both existing and new customers.

For the nine months ended Sept 30, 2020 (9MFY20), Mega First saw its cumulative net profit increase by 223.78% to RM228.24 million from RM70.49 million a year prior. Revenue for the nine months was also up, rising by 9.23% to RM553.16 million from RM506.4 million in the corresponding nine months last financial year.

Cumulative EPS for 9MFY20 now stands at 50.83 sen from 17.5 sen in 9MFY19. Since it did not declare a dividend this quarter, its 9MFY20 dividend payout stands at six sen from none this time last year.

Its power contribution business contributed 94.61% or RM274.52 million of its consolidated operation profit of RM290.14 million. Revenue wise, it contributed 57.34% or RM371.21 million to its revenue.

Notably, the group's cash generated from its operating activities during the period jumped to RM250.3 million from RM27 million a year ago, thanks to the commencement of the Don Sahong hydropower project in Laos at the beginning of the year as well as the issuance of new shares arising from the conversion of Warrants 2016/2020 and the exercise of employee share options that raised RM124 million.

The funds were deployed towards the partial repayment of the amount owed to the engineering, procurement and construction contractor of Don Sahong (RM163.3 million), the interests and principal repayment (net) of borrowings (RM101.2 million), capex (RM22.5 million), dividends (RM28.4 million) while RM41.8 million was designated as the group's cash and cash equivalents.

Mega First said its Don Sahong project is likely to yield higher earnings in 4QFY20 on the facility’s equivalent availability factor (EAF) rising to as much as 95% on high river water levels there. Mega First will be deferring the construction of its fifth turbine at the site by a year due to Covid-19 travel restrictions.

It also noted that it has submitted a bid to build a 50 megawatt (MW) large scale solar plant under the Energy Commission (EC)’s fourth Large Scale Solar Development Scheme (LSS4), where the results of the bidding exercise will be announced in January 2021. If successful, the project which carries a term of 21 years, is expected to be commissioned in 2023.

For its solar commercial and industrial projects, Mega First says it currently has five of such projects with a total installed capacity of 17MW.

“Management expects sales volume of lime products in the fourth quarter to weaken sequentially when compared to the current quarter. This is mainly due to slower offtake by existing customers as a result of plant maintenance and repair works and container shortages in some of the export routes. In addition, margins are expected to come under pressure from the current quarter as a result of recent sharp increases in freight rates of several key shipping routes due to container shortages.

"Nonetheless, the Resources Division is expected to perform satisfactorily this year compared to the previous year,” it said.

“Production of flexible plastic packaging products and paper bags has reached near capacity level in the third quarter of this year after two quarters of strong sequential growth. Management expects the fourth quarter performance to be sustained at around third quarter level on sustainable domestic and export demand, while awaiting new production capacities to kick in starting from 1Q2021.

"To cope with growing domestic and overseas demand, the division has embarked on a major expansion program to increase the production capacity of paper bags by 200% by end-2021 and production capacity of flexible packaging by 100% by end-2021. The expansion, including the construction costs of two new factories, is expected to cost about RM120 million over the next two years,” it said.

Mega First shares finished unchanged at RM7.35, valuing it RM3.63 billion. It saw 370,000 shares done.


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