Latitud's net profit soared

Results Update

Latitud, which is involved in the manufacturing of wooden furniture, has announced its results for 30/9/2009. Its net profit increased by 72.5% q-o-q or 358% y-o-y to RM11.1 million while its turnover increased by 23.8% q-o-q or 14.8% y-o-y to RM127 million. The increased net profit q-o-q was attributable to "the increase in revenue, effective cost-saving measures undertaken by Group coupled with the improve in efficiency and productivity", while for the y-o-y comparison, the improvement was mainly due to "higher revenue, strengthening of USD, decrease in the prices of certain raw materials and profits achieved by its factories in Malaysia and Thailand". These factors had collectively contributed towards Latitud recording an oversize bottom-line for this quarter (see Chart 1 below). Can Latitud repeat this performance again? We will have to wait & see but I have my doubt.


Table: Latitud's 8 quarterly results


Chart 1: Latitud's 17 quarterly results

Valuation

Based on last 4 quarters' EPS of 37 sen & current price of RM1.47 (as at 4.30pm), Latitud has a PE of 4.0 times. At this PE multiple, Latitud is fairly attractive.

Technical Outlook

Latitud appears to be trapped in a bearish "price channel". The channel line would pose resistance to any price rally at RM1.45-50. Earlier this morning, Latitud rallied to a high of RM1.55 before profit-taking set in. As at 4.30pm, it is trading at RM1.47- a gain of 31 sen over yesterday price.


Chart 2: Latitud's daily chart as at Nov 24, 2009(Source: Tradesignum)

Conclusion/Comment

We face a dilemma because we do not know whether the good performance of QE30/9/2009 is a sign of better things to come or an accident? To be sure, we need another quarter of good performance for confirmation. Until then, it is advisable to give due consideration to the chart, whereby a failure to surpass the RM1.45-50 level should lead to quick profit-taking & a sharp pullback for this stock.