Magnum - neutral

It should bracing for challenging times ahead as disposable incomes, especially among the working class, get squeezed by the rising cost of living amid the Government’s move to drive down subsidies.

Magnum’s net profit in the July-September 2013 quarter fell 10.49% to RM64.77mil from RM72.37mil a year earlier, due to lower debt costs and a better prize payout.

Turnover decreased 6.26% to RM702.39mil compared with RM749.31mil previously.

In the nine months to September 2013, net profit plunged 26.09% to RM214.87mil versus RM290.71mil in the comparable period, while revenue dipped 4.17% to RM2.25bil from RM2.35bil.

Magnum’s third quarter 2013 suggested that the business was bottoming out after the initial impact of subsidy cuts to consumer spending. It is also believes that Magnum’s fourth quarter 2013 will start to show positive quarter-on-quarter topline momentum, as the adverse impact of the subsidy rationalisation is absorbed and the benefits of the minimum wage policy start to filter through.

The impact of the goods and services tax (GST) looms in 2015, but expect the working class to absorb it relatively well since it replaces the sales tax and has exemptions on essential goods.