KUALA LUMPUR: Shares in SCGM Bhd rose marginally in early trade Wednesday despite its latest financial results coming in below expectations.

       The food packaging manufacturer added two sen, or 0.83% to RM2.44 at 9.17am. The counter has appreciated almost 10% so far this year.

       SCGM’s net profit fell 18.6% to RM7.83mil for its second quarter ended Oct 31, 2021 (2Q22), from RM9.61mil a year ago.

       Revenue however was up 18.9% to RM72.54mil, from RM61.01mil in the same quarter last year.

       SCGM declared a second interim dividend of 1.7 sen per share to be paid on Jan 26, with an ex-date of Jan 11.

       In the first six months to Oct 31, SCGM posted a net profit of RM16.11mil on revenue of RM141.84mil.

       Kenanga Research said SCGM’s 1H22 core net profit of RM16.3mil came in below expectation, making up 42% of its FY22 estimates.

       “1HFY22 CNP of RM16.3mil came below, at 42% of our estimate. 1H22 dividend of 3.7 sen is within, at 46% of our FY22E DPS of 8.1 sen,” it said.

       The research house noted that resin prices had increased since July due to electricity disruption in China and the freight issue.

       “We believe SCGM can pass on the higher costs by raising ASPs. Moving forward, SCGM will continue to focus on its food packaging segment to achieve a more favourable and higher-margin product mix.

       “We gathered that SCGM’s utilisation rate is at 65-70% (versus 55-60% during MCO) to fulfil its backlog orders. We continue to like SCGM for resilient demand for its products yet being cautious on delivery of orders due to labour shortage,” it said.

       Kenanga has trimmed its FY22E core net profit by 5% on the back of the labour shortage issue which it believes will affect its earnings in the subsequent quarters.

       “Maintain ‘outperform’ with a lowered target price of RM2.80 (from RM2.97) based on FY22E EPS of 19.1 sen at 14.7x PER,” it said.