3QFY21 core PAT of RM36.0m (QoQ: -17.9%, YoY: +41%) brought 9MFY21’s figure to RM78.1m (-8.4% YTD), which is above our and consensus expectations, accounting for 87% and 84%, respectively. The deviation was due to (i) our earlier conservative projection on associate contributions and (ii) lower opex from cost cutting measures. We revise FY21/22/23 earnings upward by 17%/6%5%. Maintain HOLD with higher TP of RM31.29 (17x PE on mid-FY22 EPS). Despite the near term uncertainties, we reckon PMM has the balance sheet strength (NCPS: RM8.00) to weather thru the storm.

Beat expectations. 3QFY21 core PAT of RM36.0m (QoQ: -17.9%, YoY: +41%) brought 9MFY21’s figure to RM78.1m (-8.4% YoY). This is above our and consensus expectations, accounting for 87% and 84% of forecasts, respectively. The deviation was due to (i) our earlier conservative projection on associate contributions and (ii) lower opex from cost cutting measures. Core PAT figure was arrived at after adjusting for derivative gain of RM1.7m and forex loss of RM8.9m.

Dividend. None declared (3QFY20: None). 9MFY21: 15 sen per share vs9MFY20: 15 senper share.

QoQ. Sales declined by 11.2% mainly due to the closure of both factories form 21-27 Dec 2020 after positive cases were detected. Core PAT fell 19.6% to RM33.4m in tandem with weaker sales coupled with lower associate contribution which decreased by -36%.

YoY. Reduced sales of -2.4% was due to temporary closure of the plants and shipment delay from port congestion. Fan products registered a tad increase of 1.4% due to higher government school project sales but was offset by 5.1% decline in home appliances segment owning to slowdown in demand in export markets. Despite this, core PAT surged by 41% due to (i) lower opex following effective cost reduction exercise; (ii) improved in overall margin attributable to lower cost of materials; and (iii) higher contribution from associate company of RM3.8m vs -RM2.2m in SPLY.

YTD. Temporary production halt coupled with slowdown in export sales volume led to sales declining 16.3%. However, core PAT chalked in a slower decline of 8.4% which cushioned by the slightly lower opex.

Outlook. For export market, we expect sales to the Middle East to recover slowly on the back of easing trade sanctions with President-elect Biden’s victory. Middle East contribution accounts for 21% of the group in 9MFY21 (from 17% in 9MFY20). Note that the products sold to the region are high-margin products (vacuum cleaners and home showers). For ASEAN region, export to Vietnam has been resilient thanks to the country’s successful containment of the pandemic. However, demand from Thailand is slowing down due to the rise in Covid-19 cases. All in, with the soft consumer demand for discretionary spending, we opine PMM outlook will stay muted in the near term.

Forecast. We revise our FY21/22/23 earnings upward by 17%/6%5% to factor in higher contribution from associate company and lower opex.

Maintain HOLD with higher TP of RM31.29 based on unchanged 17x PE multiple on mid-FY22 earnings. Despite the near term uncertainties, we reckon PMM can weather thru this storm supported by its balance sheet strength of a net cash position of RM485.9m (or RM8.00 per share) as end of Dec 2020.

Source: Hong Leong Investment Bank Research - 23 Feb 2021