LATITUD: Earnings rebounded strongly

Result Update

In QE30/9/2020, Latitud's net profit rose 39-fold q-o-q or 99% y-o-y to RM13 million while revenue rose 70% q-o-q or 21% y-o-y to RM235 million. The Group revenue increased by 21% y-o-y mainly attributable to higher sales recorded by furniture plants in Vietnam amounting to RM40.2 million; higher orders received by panel board lamination plant amounting to RM2.7 million; strengthening of US Dollar (“USD”) against Ringgit Malaysia (“RM”) by 0.9%; offset with lower orders received by Thailand sawmill plant amounting to RM1.2 million.

Group PBT increased by more than 100.0% from RM7.9 million mainly attributable to 55.4% increase in gross profit; fair value gain on derivatives of RM0.7 million in QE30/9/2021 compared to fair value loss on derivatives of RM0.3 million in QE30/9/2020; offset with foreign exchange loss of RM2.1 million in QE30/9/2021 compared to foreign exchange gain of RM0.1 million in QE30/9/2020. The substantial increase in gross profit was mainly attributable to the increase in revenue; furniture and sawmill plants recorded higher sales of better margin products; and lower production costs due to higher production output across all divisions.

Table: Latitud's 8 quarterly results


Graph: Latitud's P&L  for last 61 quarterly results

Financial Position

As at 30/9/2020, Latitud's financial position is deemed healthy with current ratio at 2.1x and gearing ratio at 0.5x.

Valuation

Latitud (closed at RM3.94 last Friday) is now trading at a trailing PER of 16 times (based on last 4 quarters' EPS of 24.32 sen). While the PER looks fairly reasonable and possibly fully valued the earnings of the last 4 quarters, it must be pointed out that the recovery in earnings has just begun. If Latitud can achieve the same level of earnings in the next few quarters, similar to QE30/9/2020, then its PER will drop to 7 times. This would make the stock exceptionally attractive.

Technical Outlook

Latitud has broken above its downtrend line RR at RM2.50 in October. Its immediate resistance is at the horizontal line at RM4.00.

Chart: Latitud's monthly chart as atNov 27, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & position, fair valuation and bullish technical outlook, Latitud is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

KAREX: Time for a Party?

Result Update

For QE30/9/2020, Karex's net profit rose 213% q-o-q to RM4.5 million on the back of a 12%-increase in revenue to RM101.7 million. Compared to the same quarter last year, bottom line has turnaround from a loss of RM167k and revenue was higher by 6%.

Higher revenue was driven by condom sales from the Sexual Wellness segment and record-high contribution from the Medical segment during the quarter. In particular, condom sales to the Americas region in particular continued to expand and contributed positively to the profitability during the current quarter. A favourable sales mix during the quarter coupled with improved cost control initiatives such as incorporation of automation led to better operating efficiency resulting in a profit before tax of RM 7.0 million for the quarter. 


Table: Karex' last 8 quarters' P&L


Graph: Karex' last 28 quarters' P&L

Financial Position

Karex's financial position as at 30/9/2020 is deemed very healthy. Its current ratio stood at 2.3 X while total liabilities to equity stood at only 0.3 X.

Valuation

Karex (closed at RM0.845 yesterday) is now trading at a PER of 176x (based on last 4 quarters' EPS of 0.48 sen). Based on the high PER, Karex is deemed unattractive. However, if the earnings recovery continues, the valuation will be less demanding in the future.

Technical Outlook

Karex appears to have broken above the 2-year base of RM0.30-0.60.

Chart: Karex's weekly chart as at November 24, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, healthy financial position, and mildly positive technical outlook, Karex may be a good stock for a recovery play. However, the valuation is very demanding and a big rally will only spring up if earnings improved substantially.

Note: 

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

PETGAS: Better Earnings, Lower Prices

Results Update

For QE30/9/2020, Petgas's net profit increased by 8% q-o-q or 37% y-o-y to RM591 million while revenue rose 0.5% q-o-q or 5.2% y-o-y to RM1.407 billion. The Group maintained its strong performance for plant and facilities reliability across all segments during the quarter under review.  Gross profit improved by 9.0% or RM61.0 million to RM735.8 million on the back of lower operating costs by Regasification and Gas Transportation segments mainly due to lower internal gas consumption cost offset by higher repair and maintenance costs. PBT and profit for the quarter were higher by 13.5% or RM96.2 million and 11.5% or RM65.8 million respectively as higher gross profit was supported by higher unrealised foreign exchange gain, negated by lower share of profit from joint venture. During the quarter, the Group recorded higher unrealised foreign exchange gain on translation of USD assets and liabilities totalling RM92.8 million due to strengthening of RM against USD compared to gain of RM20.5 million in the preceding quarter. Lower share of profit was mainly attributable to scheduled shutdown during the quarter at Kimanis Power Sdn Berhad, the Group's 60% joint venture.

Table: Petgas's last 8 quarterly results


Graph: Petgas's last 57 quarterly results

Valuation

Petgas (closed at RM16.32 in the morning session) is now trading at a PE of 18x (based on last 4 quarters' EPS of 91.6 sen). At this PER, Petgas is deemed fairly attractive.

Technical Outlook

Petgas has dropped back to its long-term uptrend line with support at RM15.20.  


Chart: Petgas's monthly chart as at Nov 19, 2020_12.30pm (Source: Malaysiastock.biz)  

Conclusion

Based on satisfactory financial performance, fairly attractive valuation & mildly positive technical outlook, I think Petgas is a good stock for long-term investment.

Note: 

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Happy Deepavali

I like to wish all my readers of the Hindu faith a very HAPPY DEEPAVALI. May the illuminating lights of Diwali guide you in all paths in your life. 

Kossan: Earnings Soared But Share Price Floored

Result Update

For QE30/9/2020 (3Q20), Kossan's net profit rose 166% q-o-q or 6-fold y-o-y to RM349 million while revenue rose 47% q-o-q or 95% y-o-y to RM1.033 billion.

The improved performance was attributable to the improvement in all its three divisions – Gloves, Technical Rubber Products and Cleanroom. The improvement in the Gloves and the Cleanroom divisions were especially significant. To wit:

The Gloves division’s revenue increased 103.24% to RM946.57 million in 3Q20 from RM465.75 million in 3Q19, with PBT rising 670.80% to RM416.65 million in the current quarter as compared with RM54.06 million from a year ago. The improved performance was mainly attributable to the higher volume sold (+34.9%) and higher average selling price as compared with 3Q19.

The Cleanroom division grew revenue and PBT by 118.82% and 1131.80% respectively to RM40.25 million and RM10.19 million in 3Q20, as compared with RM18.40 million and RM0.83 million in 3Q19. The improved performance was mainly attributable to the increase in the demand for the division’s products as a result of the COVID-19 pandemic.

Table: Kossan's last 8 quarterly results

Graph: Kossan's last 56 quarterly results

Financial Position

Kossan's financial position as at 30/9/2020 is deemed healthy with current ratio at 1.7 times while gearing ratio was at 0.6 time.

Valuation

Kossan (closed at RM6.58 yesterday) is now trading at a trailing PE of 13.9 times (based on last 4 quarters' EPS of 47.36 sen). At this PER, Kossan is deemed fairly attractive. In fact, this PE is lower than the PE multiple assigned by the market in 2019. This shows that investors have begun to discount the impact of the vaccine on the future sales of Kossan as well as other glove makers. If the arrival of the vaccines are delayed or the logistics are too daunting, then there is a likelihood that the strong demand for gloves will persist for a while.

Technical Outlook

Kossan is in a long-term uptrend line, SS with support at RM7.00 yesterday. The breakdown of the uptrend line may lead to further decline unless a quick rebound takes place. In September, Kossan broke its uptrend line, SS but it rebounded the next day. We will have to wait and see how Kossan to fare today.


Chart: Kossan's monthly chart as at November 10, 2020 (Source: Malaysiastock.biz)

Conclusion

Despite the developing negative technical outlook, Kossan is a good stock for long-term investment based on good financial performance and financial position and fairly attractive valuation.

Note: 

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Market Outlook as at November 6, 2020

Last Friday, FBMKLCI broke above its medium-term downtrend line, RR at 1500, and rallied to close at 1520. This rally may continue this week as the world celebrates the return of sanity in America (barely). I expect FBMKLCI to challenge the next 2 resistance levels at the horizontal lines at 1540 & 1590 this week. 

 Chart 1: FBMKLCI's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

The same pattern was witnessed in FBMEMAS, which broke above its medium term downtrend line, RR at 10950 last Friday. It may test its next 2 resistance levels at the horizontal lines at 11050 and 11400.

 Chart 2: FBMEMAS's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

In New York, the MSCI Emerging Market ETF broke above the Jan 2020 high at 46 last Wednesday. It rallied to close the week at 47.93. This bullish breakout may signal the shifting of fund to emerging market as the incoming Biden administration is expected to raise taxes to finance its more progressive fiscal policies. 

Chart 3: EEM's weekly chart as at Nov 6, 2020 (Source: Stockcharts.com)

Based on the above, the market is likely to go higher in the near term. You may buy some beaten down blue chip stocks, such as Tenaga, Airport and Genting, if you want to ride on the expected price recovery. 

Market Outlook as at October 30, 2020

Last Friday, FBMKLCI broke below the support from the horizontal line, AB at 1480. If FBMKLCI does not recover quickly over the next 1-2 day(s), it may continue to slide to the next support at the horizontal line, XY at 1415.

Chart 1: FBMKLCI's daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

If we are concerned that the fall in FBMKLCI may be caused by month-end closing shenanigans, then you can take a look at FBMEMAS (below). That index has not broken the line, AB connecting the 2 recent troughs. If FBMEMAS were to break below the AB line at 10600, then it may continue to slide down to the next support at the horizontal line, XY at 9860. 

Chart 2: FBMEMASs daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

The non-confirmation from FBMEMAS does not take away from the current precariousness of our stock market. Below are the state of the various sectoral indices in our market:

Sectoral indices that are in a downtrend:

• Transportation: https://www.tradingview.com/x/hkVLUTqT
• Telecommunication: https://www.tradingview.com/x/EROQ1PAr
• Property: https://www.tradingview.com/x/WaJMd5Hf
• Financial Services: https://www.tradingview.com/x/dQ5CuMKL
• Construction: https://www.tradingview.com/x/uetgG9Dj
• Energy: https://www.tradingview.com/x/bJGJmkfi

Sectoral indices that have started their downtrend:

• Plantation: https://www.tradingview.com/x/XfSWq2ry
• Consumer prod: https://www.tradingview.com/x/QHNGkusy

Sectoral index that has peaked:

• Industrial Prod: https://www.tradingview.com/x/rfA5IX8b

Sectoral indices that are still in an uptrend:

• Health care: https://www.tradingview.com/x/iVBlmfhm
• Technology: https://www.tradingview.com/x/XCViBOJb

 Based on the above, we have to be very careful in taking large position in the market.