Asia File Corporation (ASIAFLE) 1Q24’s core net profit came in at RM16.0m. There was no dividend paid during the quarter. Despite the revenue dropped 3.3% QoQ, the core Profit After Tax And Minority Interest (PATAMI) increased 70.8% on the back of favourable exchanges rates as both the Sterling Pound and Euro strengthened against local currencies and also improved cost management, such as the delivery cost.
“The forex gain was RM9.3m in 1QFY24 as compared to lower forex gain of RM2.9m in 4QFY23,” said Malacca Securities in the recent Stock Digest.
Similarly, the core PATAMI soared 97.1% to RM16.0m in 1QFY24 from RM8.1m in 1QFY23 due to the similar factors in QoQ. The forex gain was RM9.3m in 1QFY24 as compared to forex loss of RM1.9m in 1QFY23.
“We think the overall demand will be softer due to weaker consumer spending activities amid heightened inflationary pressure environment,” said Malacca Securities.
However, they expect the group’s margins will remain strong due to better cost management and favourable forex against the ringgit. Also, with the new products being launched recently in the consumer and food ware, the group will make some inroads into the oversea markets and may provide additional avenues for the sales going forward.
Malacca Securities maintains the BUY recommendation on ASIAFLE, with a revised target price of RM2.60 (from RM1.98). Risks to their recommendation include the possibility of heightened inflation caused by supply chain disruption, potentially leading to an elevated operating costs environment.
Besides, the group faces foreign exchange risks as its export proceeds are primarily denominated in GBP and EURO while imports are predominantly priced in USD. Any further depreciation of GBP/MYR or EUR/MYR could exert pressure on the group’s margin.
