KUALA LUMPUR: MSM Malaysia Holdings Bhd is now trading at a more justifiable valuation following a 24 per cent run-up in its share price in the month to date, Affin Hwang Capital said.
However, due to its limited upside, the firm downgraded MSM to a “hold” rating at an unchanged target price of 44 sen.
Affin Hwang said while lower production was a boon to sugar prices, overall weaker demand amid the Covid-19 pandemic might well tilt an anticipated deficit year to one of surplus in 2020.
It said raw sugar prices, which had rallied towards end-2019, had reversed over the past month, likely owing to softer sugar demand.
“In tandem, average selling price (ASPs) for the industrial and export segment may see renewed pressure as they closely track international sugar price movement.”
Affin Hwang is still projecting a core loss of RM95.2 million for MSM due to an overall softer demand for refined sugar against the backdrop of the Covid-19 disruptions.
The firm is positive on MSM’s expansion into value added downstream products.
“As part of MSM’s three-year strategic plan, the group aims to diversify its product offerings to boost volume and uplift the utilisation of the Johor refinery (currently at 20 per cent).
“We understand that more enquiries are coming in for liquid sugar and premix, although larger volumes have yet to be secured. Further diversification into products such as cordial, condensed milk and chocolate are also on the cards for 2020 to 2021,” Affin Hwang added.