Muskita profits seen improving

Muskita Aluminium Industries Pcl (MAI) released a lower set of 2005 results in line with expectations, Egnatia Financial Services noted in a recent report, but its prospects are improving on the back of expectations of higher revenue from the operation of its new production facilities.

Group revenues surged by 5.8% to CYP 29.2 mln amid a strong local real estate sector. Local sales advanced by 10.2% to CYP 18.9 mln, while sales from export activities declined by 1.6% due to higher competition from European rivals.

Depreciation charges and energy costs were the primary contributors of the MAI’s lower profitability, while the Company’s cost rationalization efforts mitigated bottom line impact. Net Profit came in at CYP 4.61 mln (-6.5%), yielding an EPS of 5.6 cent.

After examining the Company’s 2005 results, Egnatia have proceeded to make an upward revision to its estimates amid an increase in capacity utilization and thus revenues (both price and quantity driven increases) and an improvement in unit production costs.

Operating synergies arising from higher quantities sold will also bring about an improvement in profitability margins and thus an EPS expansion.

“Our EPS forecast for FY06 and FY07 is revised higher by 11.6% and 16.9% respectively,” Egnatia noted.

“All in all, we expect net profit for 2006-2008 to reach CYP 5.4 mln, CYP 6.2 mln and CYP 6.9 mln respectively. We believe that EBITDA and EPS CAGR would reach 11.5% and 14.7% respectively over FY05-FY08.

Using a DCF valuation method and given the upward revision in our estimates, our Target Price is raised to CYP 0.78 per share (from CYP 0.74 cent), implying an upside potential of 16% from the stock’s current price. Based on our Target Price MAI yields a 2007 P/E ratio of 10x. Our Buy recommendation is reiterated,” Egnatia concluded.