Will $MTAG / 0213 (MTAG GROUP BERHAD) Pursue Further M&A?

$MTAG / 0213 (MTAG GROUP BERHAD) has unveiled its Q1FY2024 quarterly report, revealing the following highlights:

1. Revenue: RM31.06m, showing a 45.2% decrease year-on-year due to reduced sales of mesh stemming from decreased customer orders. However, there's a 24.4% increase quarter-on-quarter driven by improved sales in mesh, label stickers, and adhesive tape distribution.

2. Gross Profit Margin (GPM): 39.4%, higher than Q1FY2023's 35.5% and the previous quarter's 38.8%.

3. Profit Before Tax (PBT): RM9.59m, down 43.3% year-on-year due to decreased revenue, yet up 26.2% quarter-on-quarter owing to increased revenue and favorable margins from a wider product range.

4. Balance Sheet: Robust with total assets at RM235.04m and total liabilities at RM14.36m. The company remains in a net cash position, holding RM25.04m in cash without any borrowings.

5. Cash Flow: Recorded a positive Free Cash Flow (FCF) of RM3.68m this quarter.

6. Acquisition: Completed the acquisition of 100% of Jostar Sdn. Bhd for RM8.5m, expanding its product portfolio with the addition of an offset printing operation. This acquisition significantly enhances MTAG's packaging and branding solutions.

7. Outlook: Focuses on supporting steady customer demand with newly-appointed contract manufacturers and plans to expand business development and investment activities to support increased manufacturing in the region. The incorporation of Jostar Sdn Bhd adds a new dimension to MTAG's offerings, strengthening its capability to provide comprehensive solutions in packaging and branding.

In summary, MTAG acquired Super Gold Industrial Sdn Bhd on October 31, 2022, and this year, on the same date, it acquired Jostar Sdn Bhd. The pattern of acquisitions around October raises curiosity—is it related to a year-end sale?xD Despite the recent acquisitions not reflecting in this quarter's results (ending in September), MTAG seems to be strategically acquiring to offset the loss of a major customer ($ATAIMS / 8176 (ATA IMS BERHAD)) and maintain its net cash position, indicating potential for more M&A activities in the future.