MAMEE financial result update

FY30/9/10
Financial Result 
As expected, MAMEE had another good quarter. For the quarter under review:

• Revenue increase 7% to RM121.8m from RM113.8m in 3Q09. Higher sales from local and foreign market as a result of effective advertising and promotion activities and strengthening of distribution channel. Its new product, Mr.Potato Rice Crisps have stronger demand than expected.
• PBT stood at RM15.6m, compared to RM16.1m 3Q09. Higher expenditure of in selling and distribution incurred and Advertising & Promotion expenses during World Cup season and Hari Raya are the cause.
• Bottom line increase 3% to RM12.3m, compared to RM11.9m due to lower effective tax incured.

Technical Outlook
MAMEE share price has been consolidate since hit a high of RM3.69(adjusted) during 23/7/10. Support at RM3.28 while resistance at RM3.45. MACD crossover signal line(red) under 0, which is beautiful.
MA(14d) try to cross over MA(50d) as well as MA(100d). Can we see a golden crossover ahead?

Stock Valuation
Mamee EPS is RM0.309(ttm) is trading at PE11x(17/12/10 closing price RM3.41). With this valuation, i think Mamee is still cheap given its stable EPS and ROE growth rate.

Future Prospect

• According to Inter-Pacific Research, Mamee FY11 capex plans totaling RM100m. RM60m will be allocated for machinery with the rest for renovation / construction for:

1. Additional warehouse in Melaka~to increase warehouse capacity by 46%
2. New factory ~ to replace aging machineries with new models. 3 new modern lines to be added (produce instant noodle)with higher production capacity(1.5x faster). Company plan to reduce their labor relief (70% workforce consist of foreign labor at the moment).

• With the heavy plan ahead, company gross margin might suffer from increase depreciation and overheads cost coupled with increasing palm oil cost.

Overall
Mamee is a good company for long term investor. Its growing rate(look at the chat below) and generous dividend payout(twice a year) is what we after. With the announcement of expansion plan for FY11, i'm pretty sure company is doing well and they look for more.
Will dividend payout affected if they need money for capex FY11? Increasing palm oil cost shall be noted.