Author: itjustabouttheprofit | Publish date: Fri, 20 Nov 2015, 12:04 AM
EPS estimation:
16.66+20.07+28.19+25.00(estimated)
=89.92sen
PE ratio : 10
Target price : RM9.00
I am here to ANSWER a simple question.
Why LATITUDE?
1) Investment in upstream operation
especially in Klin Dry and Sawmill facilities
and investment of RM35mil in upgrading or
automating existing production line
2) Newly acquired panel board lamination
factory started the operation on May 2015
3) Appreciation in US dollar
4) Low price earning ratio compare to other
furniture company
5) Good fundamental - Pure cash company
1) Investment in upstream operation
especially in Klin Dry and Sawmill facilities
and investment of RM35mil in upgrading or
automating existing production line
As per annual report, Latitude's management plans to invest in upstream operation such as Sawmill facilities (produce the tree to after it have been harvest to finished lumber) and kiln dry (process to dry the wood). With the investment in upstream operation, the company able to manage the quality and stability of the wood. Also it can be used to produce more new product for the company as well as cost saving.
Other than that, Latitude's management plans to investment RM35mil in upgrading or automating existing production line. The purpose of doing this is to reduce reliance of low-skilled labour and improve production efficiency.
WIth the investment stated above, the company able to improve the production efficiency, improve quality and stability of the product and able to produce more new product.
Hence it will lead to increase in revenue for the company and decrease cost of production for the company.
2) Newly acquired panel board lamination
factory started the operation on May 2015
The company have successfully acquired a panel board lamination factory on 7 Jan 2015. As per annual report, the factory have started operation on May 2015.
With the opening of the new factory on May 2015, the cost of sales for the Malaysia side factory will be decreased as they produce their own lamination board for their own use.
3) Appreciation in US dollar
Refer to graph above, US dollar rate against Malaysia ringgit have reached RM4.39349 on 30 Sep 2015 while the currency rate only RM3.7766 on 30 Jun 2015. With the increased in currency rate in US dollar, the revenue and profit of the company will also increased as 99% of the sales of the company denominated in US dollar.
4) Low price earning ratio compare to other
furniture company
Company Latitude Pohuat Hevea Liihen Homeriz Jaycorp
PE ratio
8.03
10.18
11.38
13.69
14.39
18.83
As per schedule above, we notice that the average price earning ratio for furniture company is stood at 12.75. Currently, Latitude is the consider as the cheapest among others listed furniture company in Malaysia with PE ratio of 8.03, 26percents discount from second lowest furniture manufacturing company, Pohuat.
5) Good fundamental - Pure cash company
As per latest quarter result, the company's owning RM92mil of cash and RM77.5mil of fixed deposit. After offsetting with the bank borrowing of RM89.3mil, the company stood at net cash of RM80.2mil, highest position in this few year. With the net cash position of RM80.2mil, the company are able to use internal fund on the investment program in upstream activities and upgrade or automate the production line.
Trade at your own risk!!! Do research before any investment decision!! Happy trading :-)
没有评论:
发表评论