Magnum Berhad has released its second quarter 2024 (2Q24) financial results, which largely aligned with or fell below market expectations. Despite these mixed outcomes, the company achieved a significant milestone in gross non-fixed offer (NFO) sales, draws, and outlets, reaching a post-COVID high, primarily due to a prolonged jackpot streak.
Analysts at Maybank have maintained their positive outlook on Magnum Berhad, reiterating a BUY rating and a discounted cash flow target price (DCF-TP) of RM1.34. This stance remains as they observe whether the impressive NFO performance can be sustained in future quarters. A key near-term factor for investors to watch is the potential disposal or listing of Magnum's 6% stake in U Mobile, which is estimated to contribute over RM0.15 per share to the DCF-TP.
In 2Q24, Magnum's core net profit reached RM45.4 million, marking a 4% increase year-on-year (YoY) and a substantial 75% rise quarter-on-quarter (QoQ). This performance met approximately 25% of the full-year earnings estimate. However, the interim dividend per share (DPS) of 2.0 sen, while flat YoY, fell slightly short of expectations, contributing to 22% of the full-year forecast. Over the first half of 2024 (6M24), the core net profit climbed to RM71.4 million, a 20% increase YoY, and the year-to-date (YTD) DPS rose marginally by 0.5 sen YoY to 3.5 sen. Nonetheless, these figures still lag behind forecasts, achieving only 40% and 39% of the full-year estimates, respectively, primarily due to a high prize payout ratio in the first quarter of 2024.
Revenue for 6M24 reached RM1.19 billion, a 10% increase YoY, slightly surpassing expectations by achieving 54% of the full-year estimate. Notably, 2Q24 revenue grew by 3% QoQ despite a reduction in the number of draws, driven by a long jackpot run in May and June 2024. This led to an improvement in gross NFO sales, draws, and outlets to 93% of 2Q19 levels, compared to the estimated stabilisation at 85%.
Looking ahead, Magnum Berhad remains cautiously optimistic, maintaining its earnings and dividends estimates. The company is poised to benefit from the potential reduction in prize payout ratios in future quarters, which could enhance profitability. Additionally, the anticipated disposal or listing of its U Mobile stake presents a significant upside potential, potentially adding over RM0.15 per share to the target price.
Source: Maybank
Title: Nice turn of luck for a change