MAMEE net profit down due to higher comodities?

FY31/12/2010
Financial Result
For the quarter under review, MAMEE revenue increase 21% to RM125.17m, compare to RM103.21m in 4Q09. Higher sales were recorded from local and foreign markets, due to effective advertising and promotion activities, as well as new product launch(Mr. Potato Rice Crisps).
However, PBT drop 35% to RM7.83m, compare to RM12.22m in 4Q09. Higher expenditure in selling and distribution, foreign exchange loss and higher provision for doubtful debts are to blame.

Commodities price had gone up so much during the past 12 months. Chart below are the price movement of the main ingredient of Mamee F&B products.

Wheat gone up 62%

Sugar gone up 46%

Palm Oil up 66%

With this, no further explanation needed why company's net profit are 30% lower despite higher revenue.

Technical Outlook
Mamee share price broke above RM3.59 with a good volume, deem to be bullish. However, it doesn't sustain for long as the crisis in Libya heat up. Follow by a disappointing financial result announcement. 
Support at RM3.42, Resistance RM3.60. Friday(25/2/11) closing at RM3.50, just under MA(50d).

Stock Valuation
Mamee EPS for current FY is RM0.294, is trading at P/E11.9x. With this multiple, i think downside is limited. Target price RM4.10(P/E14x).

Overall 
4Q10 financial result do not effect my impression of the company, which has good track record for the past 6 years(i only have 6 yrs data). With its average ROE of 14%, good balance sheet with piles of cash( RM52.9m) and growing shareholder equity, its a ACCUMULATE for me.

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MPHB seeks 100pc ownership in Magnum

Update on MPHB acquisition

MULTI-Purpose Holding Bhd (MPHB) (3859), which now holds 51 per cent of Magnum Holdings Sdn Bhd, is buying back the remaining shares of the gaming firm from private equity group CVC Capital for RM1.64 billion.

CVC Capital had spent some RM2.2 billion to buy 49 per cent of Magnum in 2008, under a deal that also privatised the gaming company.

MPHB now plans to make gaming its core business once Magnum becomes its wholly-owned subsidiary. It expects the all-share deal to further strengthen its profits and cash flow position.

"The proposed acquisition is expected to widen the investor base appeal, including institutional investors of MPHB, due to better clarity in MPHB's core business," the company said in a statement to Bursa Malaysia.
Asia 4D Holdings Ltd and a few Magnum management members are currently holding 47 per cent and 2 per cent stake, respectively, in Magnum.

MPHB yesterday signed two memorandum of understandings (MOUs) to allow the company to buy the remaining 49 per cent interest in Magnum as well as RM674.7 million redeemable convertible loan stock class C of Magnum (RCULS-C) for RM1.64 billion.

The purchase price will be satisfied with the issuance of 343.8 million new MPHB shares at an issue price of RM2.30 apiece and RM809.2 million in cash.

The signatories in the first MOU were Asia 4D Holdings, a wholly-owned subsidiary of CVC Capital Partners Asia Pacific III L.P and CVC Capital Partners Asia Pacific III Parallel Fund-A L.P, and Asia 4D Co Ltd, a wholly-owned subsidiary of Asia 4D Holdings.

MPHB also signed another MOU with a few members of Magnum management team.

The purchase price was based on, among others, the audited net assets of the Magnum group of companies of about RM1.07 billion as at December 31 2009, the nominal value of the outstanding interest accrued on the RCULS-C and the future earnings potential of Magnum.

MPHB said as gaming will be its focus, it will sell non-core assets

Read more: MPHB seeks 100pc ownership in Magnum http://www.btimes.com.my/Current_News/BTIMES/articles/9MAGNUM/Article/#ixzz1DXb3vSwK

In my opinion, i like this deal. As we know, 90% of MPHB's revenue contributed by its Gaming business, namely Magnum. As of FY3Q 10 result, company hold RM1.2b of cash and short term investment.  To fully utilize this money, buying the 49% remaining shares in Magnum is the best option, given the future earning potential of Magnum.

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MPHB expected to announce major acquisition

This is an article from TheStar, dated 9 Feb 2011.


PETALING JAYA: Multi-Purpose Holdings Bhd (MPHB) will be announcing a major acquisition today, reliable sources said, although speculation is rife that the company could also be announcing the re-listing of its gaming subsidiary Magnum Corp Sdn Bhd.

Yesterday MPHB suspended its shares since the afternoon trading session, pending a material announcement. It has already been widely speculated that MPHB is finalising plans to relist Magnum. Such talks had been reflected in the sudden surge of investor interest in MPHB's securities, contributing to the recent rise in its share price.

However, a source close to the company said the announcement was more related to a significant acquisition by MPHB.

http://biz.thestar.com.my/news/story.asp?file=/2011/2/9/business/8025179&sec=business

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