Raw sugar price and inadequate subsidy. 1Q12 core net profit of RM64.1m
(-27.8% YoY, -15.5% QoQ) after excluding non-cash items was below ours
and consensus, at 23% of our full-year forecast. This weaker result
underlines that the recent sugar subsidy mechanism revised by the
government does not sufficiently compensate for the higher raw sugar
input cost. This is a structural problem which is not easy for MSM to
muddle out from, and we believe that lower profit margins will prevail
in the quarters to come.
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Source: Maybank Research - 8 May 2012
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