- We downgrade our BUY call on Malaysian Pacific Industries (MPI) to HOLD after the recent run-up in its share price. We have a higher fair value of RM22.21/share (previously RM19.53/share), pegged to an unchanged CY21F PE of 21x representing a 25% discount to our benchmark target forward PE of 28x for outsourced semiconductor assembly and test (OSAT) companies due to its tighter liquidity.
- Our benchmark target forward PE of 28x represents a 20% premium above its 3-year historical forward PE of 23x as prospects brighten due to innovations such as 5G, 3D sensors, and electric vehicles, which progress has been accelerated by Covid-19.
- We raise our FY21F–FY23F forecasts by 13–15% after raising our volume and margin assumptions based on better operational efficiencies amid increased automation and digitalization of its operations.
- MPI’s 1QFY21 results exceeded expectations, recording a core profit of RM58mil which accounted for 34% and 33% of our and consensus’ full-year estimates respectively. This is after excluding a RM3mil exceptional loss from forex losses which were partially offset by gross dividend income from short term investments.
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