SUPERMX: Wider-Than-Expected Losses Lead to Analyst Downgrade, Target Price Cut
| Key Metric | Value |
|---|---|
| Investment Bank | TA SECURITIES |
| TP (Target Price) | RM0.28 (-4.8%) |
| Last Traded | RM0.295 |
| Recommendation |
A recent investment bank research report indicates a challenging financial period for an unnamed company, with core net losses for the first half of fiscal year 2026 (IHFY26) significantly surpassing both the bank’s and consensus estimates. The report details a core net loss of RM73.6 million for IHFY26, which substantially exceeded TA Securities’ previous full-year loss projection of RM42.4 million and the consensus estimate of RM47.8 million.
Performance Review
The poorer-than-expected results were primarily attributed to a combination of weaker-than-anticipated sales performance and higher-than-expected operating costs. Quarter-on-quarter (QoQ), the core net loss in the second quarter of fiscal year 2026 (2Q26) widened to RM58.4 million, a significant increase from the RM15.1 million net loss recorded in the first quarter of fiscal year 2026 (1Q26).
Several factors contributed to this deteriorating performance. The report highlights increased operating expenses linked to the ramping up of production at the company’s US plant, a stronger Ringgit, and lower overall sales volumes. Furthermore, customers deferred orders amid a challenging environment in non-US markets, exacerbating the pressure on margins due to higher expenses associated with US operations.
Future Outlook and Strategy
In response to the operational challenges, the company has initiated strategic moves to enhance efficiency, including shutting down older lines and plants. It has also committed to upgrading its facilities with the latest AI technologies and robotics to achieve higher productivity and automation. The report anticipates a gradual recovery in sales volumes as customers resume restocking activities. Additionally, the US plant is expected to contribute more significantly, benefiting from its exemption from US import tariffs and its alignment with the government’s push for domestic production of critical Personal Protective Equipment (PPE). However, the report cautions that the cost of production in the US remains at least twice that in Malaysia, posing a continued challenge.
Analyst Recommendation
Given the weaker-than-expected results and the ongoing cost pressures, TA Securities has downgraded its recommendation for the stock from “Hold” to “SELL”. Concurrently, the target price (TP) has been lowered to RM0.28 per share from the previous RM0.35, based on a 0.2x FY27 Price-to-Book (P/B) ratio. This adjustment reflects a more conservative outlook on the company’s near-term profitability.
