Superlon shares slip as 1Q18 profits plunge

KUALA LUMPUR: Shares in Superlon Holdings Bhd are down 14% in early trading on Wednesday after the company posted a 41.5% weaker earnings for the first quarter ended July 31 (1Q18).

The counter fell 40 sen, or 14.49% to RM2.36 with 3.5 million shares traded. It is currently the top loser so far today.

The group’s net profit slipped 41% year-on-year to RM3.57mil in 1Q18 from RM6.05mil in the corresponding quarter last year, dragged by lower sales and higher cost of materials in its manufacturing division.

Superlon said the lower other income and higher other operating expenses recorded during the quarter also contributed to the decline in net profit.

However, quarterly revenue rose 3%year-on-year to RM26.33mil from RM25.63mil previously.

MIDF Research has downgraded Superlon to “neutral” with a higher target price of RM2.36.

Superlon’s 1Q18 came in below expectation, making up only 12.8% of our full year estimates. The main reason in the sharp drop in profit is the sudden increase in raw material prices.

“The company has announced a dividend of 1.5 sen, which is lower than 2.5 sen paid in the previous corresponding quarter,” MIDF said.

The research house believes that Superlon’s second half should improve with normalising gross profit margin and with the help of sales from a new market.

“We gather that Superlon is already close to entering this new market and targets to sell products with higher average selling prices to this market,” it added.