MSM International Limited Analysis: Net Profit Decline of 75.9%

Business Description

MSM International Limited is an investment holding company headquartered in Singapore. The principal activities of its subsidiary corporations include contract manufacturing of metal products, kitchen equipment, and refrigeration appliances, as well as the sale and servicing of kitchen equipment and metal parts. The company has a geographical footprint primarily in Malaysia, with additional operations in Singapore, Indonesia, and Vietnam. Key subsidiaries include MSM Metal Industries Sdn. Bhd., MSM Equipment Manufacturer Sdn. Bhd., and MSM Kitchen Sdn. Bhd.

Industry Position and Competitors

The company operates in the manufacturing and service industry for metal products and kitchen equipment. Its competitors include other regional manufacturers and suppliers of similar products. MSM International Limited’s market share within this industry segment appears to be stable, but the competitive pressures and economic uncertainties present challenges.

Revenue Streams and Customer Base

MSM International Limited’s revenue streams are diversified across three main segments: Original Equipment Manufacturer (OEM) contract manufacturing, kitchen appliances and equipment (F&B), and cleanroom and laboratory services. The company’s customer base includes industrial clients and businesses requiring specialized kitchen and laboratory equipment.

Financial Statements Analysis

Income Statement

The company’s revenue decreased by 10.1% from RM44.0 million in HY2024 to RM39.6 million in HY2025. The net profit for HY2025 was RM492,000 compared to RM2.04 million in HY2024, marking a decline of 75.9%. This significant decline in net profit is attributed to decreased revenue in the F&B and cleanroom segments, as well as higher administrative and selling expenses.

Balance Sheet

As of 30 September 2024, total assets stood at RM109.3 million, with a slight increase from RM107.8 million as of 31 March 2024. The company’s net assets were RM33.6 million. Trade receivables increased to RM25.9 million, reflecting higher sales with extended credit terms. However, borrowings also increased to RM54.6 million, highlighting a potential risk due to higher financial liabilities.

Cash Flow Statement

The company generated net cash from operating activities amounting to RM1.9 million in HY2025. However, net cash used in financing activities was RM3.5 million, resulting in a net decrease in cash and cash equivalents of RM2.03 million. The company’s cash and bank balances at the end of the period were RM6.2 million.

Dividend and Earnings

No dividend was declared for the current financial period, consistent with the previous period. Earnings per share decreased from 1.97 Malaysian sen in HY2024 to 0.47 Malaysian sen in HY2025.

Key Findings and Recommendations

Strengths

• Diversified revenue streams across three segments
• Stable geographical footprint primarily in Malaysia
• Increased trade receivables indicating higher sales potential

Risks

• Significant decline in net profit by 75.9%
• Increased financial liabilities and borrowings
• No dividend declared, impacting income-focused investors

Special Activities

The company disposed of its shareholdings in PT Mulia Sinergi Metalindo for RM600,000, which was completed on 30 August 2024. This action is part of the company’s strategy to streamline operations and improve profitability.

Investor Recommendations

If Currently Holding the Stock

Given the decline in profitability and increased financial liabilities, it is recommended to review the position closely. Consider holding if there is confidence in the company’s ability to turn around its financial performance through strategic actions.

If Not Currently Holding the Stock

It is advised to wait for a clearer indication of improved financial performance and stability before investing. The current decline in net profit and lack of dividends are significant concerns.

Disclaimer

This analysis is based on the financial report provided and is for informational purposes only. Investors should conduct their own research and consider their financial situation and investment objectives before making any investment decisions.