Saturday, 14 February 2015

Latitude: Reaching A New Altitude

Latitude Tree FY15Q2 Financial Result

Revenue 189.1 175.7 142.8 146.8 184.4
Gross Profit 34.4 26.2 20.3 23.8 35.8
Gross% 18.2 14.9 14.2 16.2 19.4
PBT 29.5 18.5 10.3 14.8 26.0
PBT% 15.6 10.5 7.2 10.1 14.1
PATAMI 27.4 16.6 8.7 12.8 19.0

MAS Rev 32.1 27.7 23.4 32.3 31.6
MAS PBT 5.4 2.3 -0.7 3.0 2.1
VIET Rev 149.4 141.0 114.4 108.1 147.7
VIET PBT 22.6 14.8 13.0 10.9 24.9
THAI Rev 5.6 5.8 5.0 6.4 5.1
THAI PBT 0.7 1.0 -0.4 -0.1 -0.3

Total Equity 366.6 327.2 308.2 296.8 270.1
Total Assets 548.6 502.8 475.3 475.5 530.1
Trade Receivables 63.4 59.9 37.0 49.1 58.2
Inventories 103.9 97.4 93.5 90.7 95.4
Cash 151.3 124.0 123.1 109.0 147.4

Total Liabilities 181.0 173.1 167.9 179.3 205.5
Trade Payables 89.9 91.7 79.1 77.7 95.7
ST Borrowings 82.6 74.8 78.8 91.4 95.5
LT Borrowings 6.1 6.4 7.9 8.9 11.1

Net Cash Flow 15.9 -1.6 26.5 11.5 48.2
Operation 22.2 6.1 81.2 55.5 42.2
Investment -7.5 -2.7 -37.6 -34.0 -4.1
Financing -2.2 -6.1 -18.5 -5.8 5.0

EPS 28.19 17.13 8.93 13.12 19.52
NAS 3.77 3.37 3.17 3.05 2.78
Net D/E Ratio NC NC NC NC NC

Compared YoY, Latitude's latest FY15Q2 revenue rises only 2.5%. However, its PATAMI surged 44% mainly due to full contribution from its Vietnam operation.

Compared to preceding quarter of FY15Q1, PATAMI jumps 65% due to more orders, stronger USD and better productivity.

PBT from Malaysia operation doubles QoQ/YoY but PBT from Vietnam operation falls slightly YoY perhaps due to higher minimum wage.

Profit margin remain comparable to corresponding quarter one year ago.

Overall, it is a good quarterly result that beats my expectation.

Balance sheet & cash flow remain strong with an increase in net cash position.

Latitude's first half FY15's PATAMI of RM44mil is already 80% of its FY14 whole year PATAMI of RM55mil.

As there is a significant seasonality in its earning in which Q3 & Q4 are relatively weaker, it is unwise to annualize the half-year figure to predict its full year FY15 result.

With USD expected to remain strong against MYR and further recovery of US economy, I guess that Latitude should be able to achieve RM70mil PATAMI for its FY15 which ends in June15.

With this figure, its guesstimated EPS will be 72sen, and target price RM5.76 given a PE ratio of 8x.

So, at current price of RM5.31, it is trading at projected PE of 7.4x.

I have never been to the US and I don't know how do US people feel about their country's economy. However, I know that my 2 cousins in US have just moved into their new houses last year.

Latitude's dividend payout is a problem to many of its investors. It paid 25% and only 15% for its FY13 & FY14 respectively.

I think it has no reason not to pay at least 25% in FY15. 

As no analyst covers Latitude Tree at the moment, I am not sure what is the capacity utilization of its production facilities.

How nice if some investment bank starts to cover this stock soon and give it a forward PE ratio of 10x like Hevea!

To me Latitude's capacity utilization seems to be already on the high side on its peak season and further growth might be limited, unless its production picks up in low-peak season.

As its management prefers to hold more cash rather than paying out as dividends, perhaps they have plans to expand its business further through capacity expansion or acquisition?

Who knows if Latitude can surprise everyone by delivering a surprisingly good results in its traditionally weak Q3 & Q4?


  1. gamseah gamseah BD, Latitud share price n eps record high. But the earning mainly comprise of the 4m forex gain, n revenue had been maximized since they already run in full cap.

    They seems to adapt a cautios move in expanding, as they tend to acquire existing companies or its plant & machinery bit by bit rather than start up a new plant.

    My frens already took profit given the hike in share price, but i c no reasons to take profit so early. The US econ is prosperous-ing as i read from the economist, low price benefit a lot to non-oil country like Vietnam, recent electricity tariff reduce by gov which might help Latitud reduce operating cost n improve profit margin

    In future, i think Latitud might issue bonus shares to ease liquidity or right issue for expansion which might attract investors' eye balls.

    Too many solid reasons for me not to sell latitud.

    Im ambitious, I wan at least 2 baggers.

    1. It's fair to feel that US economy has just taken off as interest rate hike is yet to occur. I'm just a bit worry that Latitude's growth might be hindered by its production capacity. May be Malaysia's operation still has space for expansion after scaling down throughout the years?

      Mr KYY has asked the management for bonus issue but I feel the hope is slim. Anyway it's ok for me if no bonus issue as it will be less speculative.

  2. I'd dispose some to get back the modal. Keep the gain as shares

    1. Only "free shares" remaining?

      I notice that you actually bought into Latitude on the same day as me (28th Nov13), and also bought it rather hastily as I did not study it in detail yet, but your entry price is lower than mine :)

    2. yes..left 'free shares'.
      it's more than 100% so 'free share' method could apply.
      Yes, bought at 28th Nov 2013, then dispose half @ 2.0x. Bought back again @ 2.6x and keep till now.

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