For QE30/9/2014, Johotin reported a pre-tax profit of RM4.0 million as compared to a pre-tax loss of RM548k incurred in QE30/6/2014. Revenue rose 54% q-o-q to RM91 million due to the commencement of operation if its new factory in Teluk Panglima Garang, Selangor. which is involved in milk powder business and the manufacturing of retail packs for milk powder.
In the past 2 quarters, its financial performance was affected by product quality issue in the F&B segment. This problem arose due to the cans not totally dry when they were passed through the dryer in its production process line. The water residue inside the cans led to yeast built-up & the contamination of the product.
In QE30/6/2014, Johore Tin replaced the affected which led to a drop in revenue fell to RM58.8 million from RM61.5 million and the ensuing losses. This issue was fully settled by QE30/9/2014 and would not have any impact on Johotin's results going forward.
Table 1: Johotin's last 8 quarterly results
Chart 1: Johotin's last 20 quarterly results
Valuation
Johotin (closed at RM1.44 yesterday) is now trading at a trailing PE of 11 times (based on last 4 quarters' EPS of 13.2 sen). At this PE, the stock is deemed fully valued. However, the company expects revenue to grow to RM350 million in FY15 and based on profit margin of 8.6%, its net profit could be RM30 million. this would translate to a EPS of 32 sen. Assuming a conservative PE of 10 times, Johotin's fair value would be RM3.20.
Note: The revenue ot RM350 million in FY15 will consist of revenue from F&B segment of RM250 million (from new business operation carried out in the new factory in Selangor) and steady growth of 5-10% from tin manufacturing which will include a new 6-color flat sheet printing line to be commissioned in January 2015.
Technical Outlook
Johotin is in an uptrend line, with support at RM1.40.
Chart 2: Johotin's monthly chart as at Nov 25, 2014 (Source: Share Investor)
Conclusion
Despite the improving financial performance and 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.
Alex,
ReplyDeleteThanks for you detail explanation for johortin's "quality issue" related losses. A lot of investor deserted johortin due to this issue. This is a nice opportunity to get jojortin cheap. However, with gst looming in 6 more months, consumer stock is facing great uncertainty. With growth plan already executed, johortin is cheap at current price. The duration of investment however, need to be long, probably a minimum of a year.
Another interesting stock is ltkm. I do not believe egg consumption can be reduced even during recession. Eps for ltkm is easily 50sen. With so much cash in such a durable industry, current valuation is unbelievable.
Hi Big Sea,
ReplyDeleteI agree with your take on LTKM. This poultry company is well-managed and very attractive. It certainly a good stock for investors looking for stable income. However, poultry stocks are cyclical. When the cycle turns downward, it would drop for a while. Be careful not to be caught out when that happens.