Thursday, December 06, 2012

Latitud- the recovery may begin?

Results Update

For QE30/9/2012, Latitud's net profit rose 32% q-o-q or 28-fold y-o-y to RM9.0 million while revenue rose 9% y-o-y but declined 2% q-o-q to RM140 million. The improved bottom-line is attributed to higher sales (y-o-y), better margin & favorable forex movement (with USD strengthening against MYR).


Table 1: Latitud's last 8 quarterly results


Chart 1: Latitud's last 29 quarterly results 

Industrial Outlook & Future Prospects

Latitud's export heavily to the US (as per its Annual report for FY2011, 95% of its sales is to the US).
Furniture sales are correlated to the housing market. Since the downturn in US housing market in 2008 - it actually peaked in 2006 - Latitud's revenue had stagnated. Over the past few months, there are tentative signs that the US housing market might have bottomed. There are even signs that the US housing market may be rebounding. This could be the driver for most sales for Latitud for the months to come.

Besides the poor US housing market affecting its sales, Latitud's bottom-line was also affected by the strengthening of the MYR vis-s-vis the USD and higher raw material. The recent strengthening of the USD, coupled with a drop in raw material cost and improvement in the US housing market, could drive up Latitud's earning.


Chart 2: US housing market (Source: Street Talk Live)


Valuation

Latitud (closed at RM0.74 yesterday) is now trading at a PE of 3.9 times (based on last 4 quarters' EPS of 19.2 sen). At this PE, Latitud is deemed fairly attractive.

Technical Outlook

this morning, Latitud has broken above its long-term downtrend line at RM0.75 - which happens to be the strong horizontal line. With this breakout, the stock may move sideway or move higher. The thin volume is a caution to all that this breakout may not sustain.


Chart 3: Latitud's weekly chart as at Dec 6, 2012_11am  (Source: Quickcharts)

Conclusion

Based on better financial performance, attractive valuation & potential positive technical outlook, Latitud 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, Latitud.

2 comments:

charles leong said...

Hi Alex -its funny.both of us seem to be on the same wave line.i just bought yesterday at 73 bcos it was about to break the 52 weeks high of 75 with increasing volume.plus also com TE 3cent ex on 18.what do you think of dominan? looks like some movement there lately.care to comment?

Alex Lu said...

Hi charles leong

Yes, it is funny. I think it happened because you- like me - have been watching stocks too long. God forbids, we are beginning to see the same thing.

Good luck to your investment or trade in Latitud.