Tuesday, February 28, 2012

JTInter- top-line & bottom-line contracted due to trade normalization

Results Update

JTInter announced its results for QE31/12/2011 yesterday. Its net profit dropped 55% q-o-q or 34% y-o-y to RM18.1 million while turnover dropped 21% q-o-q or 4% y-o-y to RM266 million. The decline in turnover was due to the normalization of sales volume (where sales volume would rise just prior to the announcement of the fiscal budget - which was in the immediate preceding quarter - on speculation of a potential hike in excise duties or sales tax on cigarettes. If you compared the turnover for QE30/9/2011 & QE30/6/2011, the additional turnover is about RM30 million- which was borrowed from QE31/12/2011. Thus the drop of turnover of about RM30 million for QE31/12/2011 when compared to QE30/9/2011.

The lower sales for QE31/12/2011 led to a disproportionate decline in net profit due to higher marketing expenditures.

Table: JTInter's last 8 quarterly results

Chart 1: JTInter's last 20 quarterly results

Chart 2: JTInter's profit margin last 20 quarterly results


JTInter (closed at RM6.93 at the end of the morning session) is now trading at a PE 14.7 times (based on last 4 quarters' EPS of 47 sen). At this PE multiple, JTInter is still deemed fairly attractive.

Technical Outlook

In December last year, JTInter hit a high of RM7.40, nearly equaled its June high of RM7.50. If we used the 10-month SMA line as the uptrend line, then JTInter has broken that uptrend line. The failure to surpass the June high plus the breakdown of the uptrend line could signal a change in the trend to sideway. The support for the stock will be the 20-month SMA line at RM6.50 & then at the psychological RM6.00 level.

Chart 3: JTInter's monthly chart as t Feb 2, 2012 (Source: Tradesignum)


Based on satisfactory financial performance & still attractive valuation, I would still consider JTInter a good stock for long-term investment. However, the technical outlook has turned cautious and the stock is likely to trade sideway for a while.

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