All You Need To Know About Magni-Tech Industries Bhd

Magni-Tech Industries Bhd (Magni-Tech) manufactures garments in its plants in Malaysia and Vietnam for primary income. It manufactures packaging materials in Malaysia for secondary income. As of 30 August 2019, the company is valued at RM 877.1 million in market capitalisation. 

In this article, I’ll cover on its recent financial results, happenings, and valuation figures. Here are 12 things to know about Magni-Tech before you invest.

• Segment 1: Garment Manufacturing
  It is Magni-Tech’s main source of income. Segment profits had grown at a CAGR of 22.7% for the last ten years, growing from RM 15.3 million in 2009 to RM 118.6 million in 2019. This is mainly due to receiving higher orders consistently from 1 prominent customer who has a vast network of retail operations worldwide.
  
  
  
  

Source: Magni-Tech’s Annual Reports

Its key markets are as follows:

Key Markets	Revenue 2009 (RM Million)	Revenue 2019(RM Million)	% of TotalRevenue for Year 2019	10-YearCAGR (%)
The United States	130.4	289.8	27.0%	8.3%
Europe	109.2	260.6	24.3%	9.1%
China	8.2	206.9	19.3%	38.2%

• Segment 2: Packaging Materials
  It is a smaller division of Magni-Tech which derives its revenues, mostly in Malaysia. It has made RM 5-6 million in segment profits per annum.
  
  
  

Source: Magni-Tech’s Annual Reports

• Financial Results
  Overall, Magni-Tech has attained a CAGR of 10.7% and 24.4% in sales &
  shareholders’ earnings for the last ten years. Revenues had grown from RM 388.1 million in 2009 to RM 1.07 billion in 2019. Earnings increased from RM 11.5 million in 2009 to RM 102.6 million in 2019 as it achieved higher revenues as discussed above and increased its passive income in the ten-year period. Its passive income consists of interest income from cash and bank balances and fixed deposit and dividend income sourced from investments into quoted unit trust.
  
  
  

Source: Magni-Tech’s Annual Reports

• Return on Equity (ROE)
  Magni-Tech has a 10-Year ROE figures of 18.68% a year. This means, the company has made, on average, RM 18.68 in profits per year from each RM 100.00 it has in shareholders’ equity from 2010 to 2019.
  
  
  
• Balance Sheet Strength
  As of 30 April 2019, Magni-Tech has reported to have RM 529.6 million in shareholders’ equity and zero debt. It has reported to have a total of RM 522.8 million and RM 68.6 million in current assets and liabilities. It has, as such, a current ratio of 7.62.
  
  
  
• Cash Flow Management
  From 2010 to 2019, Magni-Tech has brought in:
  
  – RM 410.4 million in positive cash flows from operations.
  – RM 24.4 million in dividend income.
  – RM 12.7 million in interest income.
  – RM 4.7 million in net equities.
  
  
  Out of which, it has spent the following:
  
  – RM 58.7 million in net capital expenditures.
  – RM 151.0 million in net investments into investment securities.
  – RM 0.2 million in debt repayments.
  – RM 201.7 million in dividend payments to its shareholders.
  
  
  
  

Source: Magni-Tech’s Annual Reports

• Evidently, Magni-Tech had built a track record for generating cash flows from operations and chose to split its cash proceeds 50 : 50 where 50% are invested into CAPEX and unit trust and the other 50% are paid to its shareholders in the form of dividends.
  
  
  
• Major Shareholders
  As of 13 August 2019, the five major shareholders of Magni-Tech are as follows:
  
  

No.	Major Shareholders	Shareholdings (%)
1	Tan Poay Seng (TPS)	23.46%
2	KP Holdings Sdn Bhd	13.10%
3	Siyasi Sdn Bhd	6.65%
4	Tan Sri Dato’ Seri Tan Kok Ping (TKP)	4.86%
5	Lee Yuit Eow	3.12%

Source: Magni-Tech’s Annual Reports


TKP is the father of TPS. TKP is appointed as Executive Chairman of the company. Meanwhile, TPS is the Managing Director of Magni-Tech. The father and son duo remain influential to the company’s direction in the future. 

• Major Risks
  Magni-Tech is subjected to the risk of customer concentration where it derived 83% of its total revenues from one major customer in 2019. Its sales to the customer is worth RM 890.3 million in that financial year.
  
  
  
• Major Announcements
  On 9 August 2019, Magni-Tech has proposed to undertake:
  
  – Subdivision of 1 existing share into 2 subdivided shares.
  – Bonus Issue of 1 bonus share for every 3 subdivided shares.
  
  
  It would increase its number of shares from 162.7 million currently to a total of 434.0 million upon completion. A shareholder that has as much as 1,000 shares initially would end up with having 2,666 shares. If these proposals are approved, it expects to be completed by the final quarter of calendar year of 2019.
  
  
  
• Valuation 1: P/E Ratio
  As at 30 August 2019, Magni-Tech is trading at RM 5.39 a share. Hence, it has a current P/E Ratio of 8.55, above its ten-year average of 6.94 for the moment. With that said, it remains one of the few stocks that have below 10 in P/E Ratio.
  
  
  

• Valuation 2: P/B Ratio
  As of 30 April 2019, Magni-Tech has net assets of RM 3.25 per share. It has a current P/B Ratio is 1.66, above its 10-Year Average of 1.22.
  
  
  

• Valuation 3: Dividend Yields
  In 2019, it has paid out 23.0 sen in dividends per share (DPS), which is a continuous increase from 4.5 sen in 2009.
  
  
  

Source: Magni-Tech’s Annual Reports


At current price of RM 5.39 a share, its dividend yield is 4.27% a year. It is on par with its 5-Year Average of 4.28% but below its 10-Year Average of 4.90% per annum.

VIA’s Verdict 

For the past ten years, Magni-Tech has delivered continuous growth in revenue, earnings, and dividend payments to its shareholders. It had caused a rise in the company’s stock prices, lifting up its market capitalisation from RM 57.0 million in 2009 to RM 877.1 million in 2019. 

Question: ‘Would you invest in Magni-Tech at RM 5.39 a share today?’ 

That, I’ll leave it to you to answer. 

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