LATITUD: Earnings Growth Continued (UPDATED)

Result Update

In QE301/12/2020, Latitud's net profit rose 103% q-o-q or 269% y-o-y to RM26.6 million while revenue rose 4% q-o-q or 17% y-o-y to RM244 million. The Group revenue rose q-o-q mainly attributable to higher sales recorded by furniture plants due to higher shipment in current quarter and higher local sales recorded by panel board lamination plant, which were offset by weakening of US Dollar (“USD”) against Ringgit Malaysia (“RM”) by 1.2%.

The Group has recorded a 80%-increase in PBT from RM16.8 million to RM30.3 million mainly attributable to the increase in gross profit; lower foreign exchange loss of RM1.1 million recorded in current quarter compared to preceding quarter; and final insurance compensation of RM7.8 million received by a furniture plant in Vietnam in current quarter for a fire incident occurred in FY2018.

The Group has recorded 26%-increase in gross profit from RM30.3 to RM38.1 million mainly attributable to the increase in revenue and higher sales of better margin products.

Table: Latitud's 8 quarterly results


Graph: Latitud's P&L  for last 62 quarterly results

Financial Position

As at 31/12/2020, Latitud's financial position is deemed healthy with current ratio at 2.2x and gearing ratio at 0.5x.

Valuation

Latitud (closed at RM4.19 last Friday) is now trading at a trailing PER of 9.4 times (based on last 4 quarters' EPS of 44.7 sen). If we exclude the one-off exceptional gain from insurance claim of RM7.8 million received by a furniture plant in Vietnam, the PE ratio is still quite attractive at 11.4 times.

Proposed Bonus Issue

Latitud has proposed a 1-for-1 bonus issue in January (here). The ex date for the bonus issue has just been fixed on 12 February (here). This will likely attract retail buying interest which will boost the share price in the near term.

Technical Outlook

Latitud is in an uptrend line with support at RM3.90. Immediate resistance is at the horizontal line at RM4.50.

Chart 1: Latitud's daily chart as at Feb 25, 2021 (Source: Malaysiastock.biz)

Looking at the monthly chart, we can see that Latitud has broken above the long term downtrend line at RM2.50 in October 2020.

Chart: Latitud's monthly chart as at Feb 25, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & position, fairly attractive 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.