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.