KUALA LUMPUR (Dec 4): Shares in garment maker Magni-Tech Industries Bhd fell as much as 21 sen or 8.05% to RM2.40 in the morning trade today after the group's net profit dropped 30.24% in the second quarter ended Oct 31, 2020 (2QFY21).

At noon break, the counter pared some losses at RM2.45, still down 16 sen or 6.13%.

The stock, which was among the top losers, saw 1.98 million shares traded.

The group announced yesterday that its net profit for 2QFY21 fell 30.24% to RM20.84 million, from RM29.87 million a year ago. Its revenue also declined by 10.69% to RM269.1 million, from RM301.33 million.

The group declared a second interim dividend of 1.8 sen, bringing the year-to-date dividend declared to 3.8 sen.

On a quarter-on-quarter basis, the group's net profit fell 22.13% from RM26.76 million, while its revenue slipped 7.84% from RM291.99 million.

For the cumulative six months ended Oct 31, 2020 (1HFY21), the group's net profit decreased by 21.18% to RM47.59 million, from RM60.38 million a year earlier. Its revenue also dropped by 10.74% to RM561.09 million, from RM628.66 million.

The group attributed the lacklustre performance to the negative impacts of Covid-19, including related multiple lockdowns and border restrictions, which have dampened consumer sentiments and reduced consumer spending.

Public Invest Research's analyst Wong Ling Ling said in a note today that Magni's weaker set of results was mainly dragged by lower sales orders received from its single largest customer.

"After adjusting for exceptional items and foreign exchange loss, the group's 1HFY21 core net profit came in at RM49 million. Results were below expectations, accounting for 40.7% of our earnings estimates," she said.

Wong said the discrepancy was largely due to the lower-than-expected sales from its garment segment.

"As such, we tweak our FY21 earnings estimates downwards by 7% to account for lower sales, which we believe were affected by weaker consumer sentiments," she added.

However, she maintains her forecasts for Magni's FY22 to FY23 as she anticipates mega sporting events to drive sales.

"Mega sporting events like UEFA EURO 2020 and Tokyo Olympics 2020, which are scheduled to be held next year, should augur well for global sportswear demand.

"As such, we remain positive about Magni's long-term prospects as the group should benefit from the revival of sporting events," she said.

While capacity expansion plans are largely on hold for the time being, Wong thinks Magni will continue to streamline its operations to boost productivity.

"Given Magni's strong net cash position of RM337 million with zero borrowings, we do not rule out the possibility of merger-and-acquisition exercises in the future to diversify its product offerings," she said.

Wong reduces her target price for Magni to RM2.82, from RM2.85, but maintains an "outperform" call on the stock.

"For full-year FY21F, we are projecting a dividend yield of 3.5%," she said.