ECONOMICS 223: Refined sugar producer MSM Malaysia Holdings Bhd’s profitability may be affected if the new government lowers the ceiling price of refined sugar: Mikroeconomy Case Study, USM, Malaysia

However, the group was not able to fully capture the benefits of the lower raw sugar costs during the quarter, as it had locked in its raw sugar at 14 US cents to 15 US cents per pound, which is higher than the average international raw sugar price of 13 US cents per pound. “This led to a lower-than-expected profit margin and a 1Q18 core net profit that made up just 14% of our full-year forecast and 12% of the consensus number,” said the research house in a note, while maintaining its “reduce” call on MSM. Target price-wise, it was lowered to RM2.77 from RM2.89 previously. However, CIMB Research projected challenging earnings prospects for the refined sugar producer in the second half of the financial year 2018. This expectation was on the back of higher depreciation and interest expense costs relating to its new sugar refinery in Johor, which is due to come on stream in end-June 2018. Meanwhile, MIDF Research said that MSM’s profit margin is anticipated to recover in 2018, given the soon-to-be-completed refinery plant in Johor, which would further drive the production cost lower.