Magnum Quarterly Result 30-June-2006

Magnum Corporation Bhd posted a net profit of RM66.48 million in the second quarter ended June 30, 2006, up 36.1% from RM48.85 million a year earlier due to higher sales and lower prizes payout ratio.

It declared an interim dividend of six sen less tax.

In a statement on Aug 23, Magnum said revenue rose 11.2% to RM716.02 million from RM644.08 million due to higher gaming sales, which grew 11.4% on the back of an additional draw and mBox sales.

For the first half, its net profit was 11% higher at RM126.9 million against RM114.35 million a year earlier, while revenue rose 7.9% to RM1.5 billion versus RM1.39 billion.

quoted from The Edge Daily, 24th-Aug-2006

Magnum has posted an excellent result yesterday. Despite World Cup which traditionally lowered the total revenue of gaming companies, Magnum managed to register 11.2% rise. Contrarily, in World Cup 2002, Magnum suffered 2.5% Y-o-Y drop in revenue. This is mainly owing to its increased sale of m-Box, a similar gaming product that was initially launched by Tanjong as I-Box. It is a renovative product where with just RM1, one can bet on all the permutations of a 4D number. I think it must attracts a lot of small punters such as foreign labor and maid. Furthermore, this product also provides better profit margin. Recently, Sports Toto also followed the herd and launched I-Perm.

With the jump of 36.1% in profit, EPS for half a year of Magnum now standing at 8.70 sen. If Magnum can keep up with current performance, whole year EPS is estimated to be 17.4 sen. At current price of RM2.04, this equals to PER of 11.7! Very attractive I would say. Besides, Magnum's nett cash has increased to RM814 millions!

On the prize payout ratio, Magnum always performs the worst among the other 2 competitors. For the six months period, it is somewhat disappointed to hear that the ratio is marginally increased compare to the same period last year. Personally I view this as a blessing in disguise. This is because higher prize payout ratio will definitely make Magnum more attractive to punters and thus maintain its market share in 4D betting. I think that as long as the ratio is not ridiculously higher than the competitors, it is necessary for Magnum to fence off market share domination, especially from BJTOTO, since the latter has more variety and popular products.

Coupled with its latest 6 sen dividen declared, I strongly think it is a good buy.


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