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Monday, December 03, 2012

Johotin- benefiting from its dairy products division (UPDATED)

Background

Johore Tin Bhd ('Johotin') is involved in the manufacture of tins, cans & other containers as well as manufacturing of milk & other dairy products. The dairy products division, which started in late 2011, is now the main profit center for this company.

Recent Corporate Exercise

In October, Johotin completed a Rights Issue of 1 share c/w 1 free warrant at RM1.28 for  every 3 shares owned- an exercise which I missed out on when I posted on the stock yesterday. Hat tip to reader Charles Leong brought this point to my attention. I have amended the EPS & NTA per share (in Table 1) as well as the PE multiple (in the valuation section). The recommendation remains unchanged.

Recent Financial Performance

Johotin's net profit increased by 48% q-o-q or 44-fold y-o-y to RM7.8 million while revenue increased by 6% q-o-q or 138% y-o-y to RM65 million. The improved performance is attributable to the new dairy products division which contributed a net profit of RM11.1 million while the tin manufacturing division only contributed a net profit of RM7.2 million for 9-month ended 30/9/2012. In term of revenue, dairy products division contribute RM120.9 million while tin manufacturing contributed 50.9 million.


Table 1: Johotin's last 8 quarterly results


Chart 1: Johotin's last 12 quarterly results 

Financial Position

As at 30/9/2012, Johotin's current ratio stood at 2.8 times while gearing ratio stood at 0.3 time. as such, its financial position is deemed healthy.

Valuation

Johotin (closed at RM1.45 last Friday) is now trading at a PE of 5.7 times (based on last 4 quarters' EPS of 25.52 sen).  At this multiple, Johotin is deemed attractive. I think it may command a PE of 8-10 times for a medium-size consumer stock. Thus, its target price may be RM2.72-3.40.

Technical Outlook

Johotin is in an uptrend after breaking above its strong horizontal resistance at RM0.90 in March 2012. Its immediate support is the horizontal line at RM1.30.


Chart 2: Johotin's monthly chart as at Nov 30, 2012  (Source: Tradesignum)

Conclusion

Based on good financial performance & position, attractive valuation & positive technical outlook, Johotin is a good stock for long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Johotin.

3 comments:

charles leong said...

Hi ALEX-GLAD U COMMENT ON JOHORE TIN.I BOUGHT COM RIGHTS.WAITING.BY THE WAY COULD U COMMENT ON LION IND.ITS QUITE LOW AT 91.AT THIS FLOOR LEVEL I THINK I WONT BE FRACTURE VERY MUCH.LOVE YOUR VIEWS PLEASE.TQ

Goh Ch said...

hi alex, is johotin still worth holding?

Alex Lu said...

Hi Goh Ch

Johotin reported a good set of result for QE30/6/2013. Net profit increased 2% q-o-q or 8% y-o-y to Rm5.7 million.

Technically speaking, it is still in an uptrend. It should have good support at the horizontal line at RM1.60. If it breaks that support, the stock may turn bearish.

For now, it is a HOLD.