Monday, February 27, 2012

Latexx- Something don't smell right!


Results Update

Latexx's results for QE31/12/2011 disappoints many in term of the decline in both the top-line & bottom-line. Net profit declined by 93% q-o-q or 91% y-o-y to RM926k while turnover dropped by 26% q-o-q or 16% y-o-y to RM90 million. The drop in the bottom-line was due to the provision of RM7.6 million for settlement of claim with the Inland Revenue Board due to reassessment of income tax payable. The decline in turnover is due to slower sales arising from volatility of the raw material costs. I find the explanation for the decline in turnover to be unacceptable. You don't see Kossan or Topglov suffering from a decline in turnover because of volatility in raw material costs! Something is not right in Latexx!


Table: Latexx's last 8 quarterly results



Chart 1: Latexx's last 14 quarterly results

Valuation

Latexx (presently, at RM1.54) is trading at a PE of 8 times (based on last 4 quarters' EOS of 19.34 sen). Based on this PE multiple, Latexx's valuation is deemed undemanding.

Technical Outlook

Latexx has broken to the downside of its triangle at RM1.72 in early February. It also broke below its horizontal support at RM1.72 last Friday. Its next support is at the horizontal line at RM1.45.


Chart 2: Latexx's daily chart as at Feb 27, 2012_11.00am (Source: Quickcharts)

Conclusion

Based on unsatisfactory explanation for the decline in turnover & the bearish technical outlook, Latexx is a stock to avoid.
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5 comments:

  1. MaxWealth88Monday, February 27, 2012 3:22:00 PM

    hi alex,

    what do you think about PIE?

    thanks
    maxwealth88

    ReplyDelete
  2. Alex LuMonday, February 27, 2012 4:44:00 PM

    Hi MaxWealth88

    PIE had a good quarter for QE31/12/2011. Its net profit rose 11% q-o-q or 71% y-o-y to RM8.8 million while turnover was up 5% q-o-q or 32% y-o-y to RM94.5 million. Presently, it is trading at 7.3 times its last 4 quarters' EPS of 60 sen.

    It is rising in an upward channel with resistance at RM4.50. Thereafter, it may revisit its 2008 high at RM5.06.

    ReplyDelete
  3. StanleyMonday, February 27, 2012 8:29:00 PM

    Hi Alex, any comment on.MSC on its surprise results? Thanks, stanley

    ReplyDelete
  4. cheerTuesday, February 28, 2012 5:02:00 PM

    This is something i found frm a forum that relate to the latexx bearish

    其实它没跌破1.00 的理由 根据#198楼所说 这次股价会跌只是因为补交税务造成净利突然少了许多 勉强构成了股价下跌的理由 要不然它的盈利算是已经是稳定了的 一个突如奇来的因素 就看你怎么想 有人可以把它当着入场的机遇 也有人会害怕逃离 这就是股票从来不缺上涨或下跌的理由

    ReplyDelete
  5. Alex LuWednesday, February 29, 2012 9:05:00 AM

    Hi Stanley


    MSC's results was bad but not entirely surprising. The company made provision for the diminution in value of its tin assets as well as further provision for its investment in a nickel development. These weighed down the bottom-line by RM24.8 mil. Without these, MSC would still report a loss due to lower sales & production in the Koba Tin's operation in Indonesia which was brought on by the tin export moratorium on the shipment of tin metal from Bangka Island w.e.f. Oct 1, 2011.

    Its immediate support is at RM4.00 & thereafter at RM3.70.

    ReplyDelete