For QE31/12/2014, Latitud's net profit rose 65% q-o-q or 44% y-o-y to RM27.4 million while revenue increased by 7.6% q-o-q or 2.5% y-o-y to RM189 million. Revenue grew y-o-y due to higher orders received, strengthening of US Dollar against Ringgit Malaysia; and overall higher production output by all the factories of the Group. PBT increased y-o-y due to the substantial increase in gross profit due to better gross profit margin; lower finance costs due to decrease in total bank borrowings; and increase in unrealised foreign exchange gain
Table 1: Latitud's last 8 quarterly results
Chart 1: Latitud's last 38 quarterly results
Valuation
Latitud (closed at RM5.23 this morning) is now trading at a PE of 7.8 times (based on last 4 quarters' EPS of 67.4 sen). At this PE, Latitud is deemed fairly attractive. However, we have to be wary not to fall into the trap of buying into (or holding onto) a stock with its earning at a cyclical high. That happens when all the good positives are in and the share price reflects that.
Technical Outlook
Latitud had rallied ever since it broke above its intermediate downtrend line in December 2012 (see my earlier post). It had surprised me by exceeding the February-March 2010 high of RM1.75 (see my follow-up post). If we do a projection using the monthly chart below, we can argue that the potential target could be as high as RM5.30-5.50.
Chart 2: Latitud's monthly chart as at Feb 12, 2015 (Source: ShareInvestor.com)
Conclusion
Based on better financial performance & attractive valuation, Latitud is a good stock for long-term investment. However, I think that Latitud is due for some profit-taking. I would rate it a SELL INTO STRENGTH.
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.
Latitud : I do not think the current EPS is sustainable. I believe it is due to one off currency gain due to the weakening of RM against USD. The fact the Revenue does not grow is even more worrying. Either Latitud already hit a plateau due to capacity limitation or the demand may be already at the max. I will sell half of my Latitud. The other half will depends on how Latitud decide to allocate their cash.
ReplyDeleteDo you mind taking a look at Johor Tin and VS ?
MD of Johor Tin is hinting that the profit of Q4 could be as high as RM 9 million!
Hi Alex
ReplyDeleteIn that case are you implying semiconductor too has reach its cyclical top?
Thanks.
Btw, evergreen still looks 'good'?
HI Big Sea,
ReplyDeleteThanks for your sharing on Latitud. On VS, I can't add to what I had written on this stock.
For Johotin, I feel that the uptrend line support at RM1.30 will cap any short-term weakness in the price. However, the outlook is likely to be positive instead of negative.
If what you had shared regarding its result for QE31/12/2014 pans out, the stock could break above its intermediate downtrend line and continues with its prior uptrend. The last times it had a PBT of RM8-9 million was in QE30/9/2012 & QE30/9/2013. That's when the stock was riding high!
Hi lai,
ReplyDeleteWe have to watch out for stocks that are at their peak earnings. I feel that Latitud & other furniture makers could fall into that category. Semiconductor stocks may also join the rank soon. We will have to wait & see.