MSC’s 1QFY26 CNP came in at RM43.0m (+13.1% QoQ, more than fivefold YoY), representing 28% of our full year forecast and 33% of consensus. The results were within our expectations but ahead of consensus.
The Group declared a special single-tier dividend of 4.0sen (ex-date 11 June) (1QFY25: Nil).
Earnings growth was mainly driven by (i) firmer tin prices, (ii) stronger mining performance, (iii) improved realised margins from tin intermediate encashment and (iv) continued operational cost savings following the Butterworth smelter closure.
Global tin fundamentals remain supportive amid structural demand growth and ongoing geopolitical supply disruptions, while operational efficiencies and cost savings at Pulau Indah continue to support MSC’s earnings recovery and margin expansion.
Maintain BUY with a higher TP of RM3.06, based on 13x FY27F P/E applied to an EPS of 23.5sen.
Within our expectations, but ahead of consensus. Excluding exceptional items, mainly a net fair value loss on forward currency contracts of RM0.1m, MSC’s 1QFY26 core net profit came in at RM43.0m (+13.1% QoQ; more than fivefold YoY). The results accounted for 28% of our full-year forecast and 33% of consensus estimates.
Dividend. The Group declared a special single-tier dividend of 4.0sen (ex-date 11 June) (1QFY25: Nil).
QoQ. 1QFY26 CNP increased 13.3% QoQ, mainly driven by stronger mining earnings, with tin mining PBT more than doubling QoQ to RM55.2m (4QFY25: RM25.4m) following a 28.1% QoQ increase in average tin prices (USD48.8/t vs USD38.1/t in 4QFY25) and improved production grade. This was further supported by lower operating expenses, which declined 8.6% QoQ to RM382.8m (4QFY25: RM418.8m), partly reflecting ongoing cost savings from the Butterworth smelter closure. This more than offset weaker smelting earnings, with segmental PBT declining 50.4% QoQ to RM15.5m (4QFY25: RM31.3m), mainly due to lower sales and encashment of tin intermediates, alongside the absence of tantalum slag sales.
YoY. 1QFY26 CNP increased more than fivefold YoY, supported by (i) a 52.5% YoY increase in average tin prices (USD48.8/t in vs USD32.0/t in 1QFY25), (ii) stronger tin metal production, which increased 4.7% YoY to 670MT (1QFY25: 640MT) and lifted tin mining PBT to RM55.2m (1QFY25: RM29.3m), and (iii) higher profits from the encashment of tin intermediates amid firmer realised margins, resulting in tin smelting PBT nearly tripling YoY to RM15.7m (1QFY25: RM5.5m). Smelting earnings were further supported by ongoing cost savings and operational efficiencies following the closure of the Butterworth smelter plant and the consolidation of operations at Pulau Indah.
Outlook. Global tin fundamentals remain supportive, underpinned by structural demand from electronics, semiconductors, AI, data centres and clean energy applications, while ongoing geopolitical and regulatory uncertainties continue to constrain global supply. In particular, the ongoing closure of the Strait of Hormuz and disruptions to regional energy infrastructure could further tighten global commodity supply chains and elevate energy costs. Against this backdrop, MSC should continue to benefit from firmer tin prices, improved ore visibility and operational efficiencies following the consolidation of smelting operations at Pulau Indah. The ongoing closure of the Butterworth smelter plant is expected to deliver further structural cost savings and improved operational efficiency. Meanwhile, management remains focused on improving mining productivity, expanding resources and enhancing recovery rates through modernised processing methods and potential joint ventures. Overall, we continue to see a clearer pathway towards earnings recovery and margin expansion over FY26–27.
Earnings revision. We raise our FY26F–FY28F CNP forecasts by 1.4%/1.2%/0.9% to RM155.2m/RM197.6m/RM271.6m (from RM153.1m/RM195.2m/RM269.1m), following housekeeping adjustments after incorporating figures from the FY25 annual report.
Valuation. We maintain our BUY call on MSC with a higher TP of RM3.06 (from RM2.37) after rolling forward our valuation base to FY27F, based on 13x FY27F EPS of 23.5sen (FY26F EPS: 18.2sen). We believe the roll-forward to FY27F is justified by improving earnings visibility following the consolidation of operations at Pulau Indah, continued structural cost savings and supportive medium-term tin fundamentals. Our positive view is further supported by MSC’s strategic positioning as the world’s largest independent tin smelter, alongside lower dependence on third-party feedstock and greater flexibility to capture upside from tin price volatility in a structurally tight market.
Risks. Key downside risks include tin price volatility, feedstock supply disruptions and delays in commissioning the sand-tailings facility, which could affect margin recovery and operational performance.
Disclaimer
The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.
Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.
| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.952620 | 3.984418 |
| EUR | 4.602737 | 4.607520 |
| CNY | 0.583458 | 0.584086 |
| HKD | 0.504699 | 0.508269 |
| SGD | 3.089871 | 3.111658 |