Friday, 28 August 2015

Johotin: That's More Like It

Johore Tin FY15Q2 Financial Result

JOHOTIN (RM mil) FY15Q2 FY15Q1 FY14Q4 FY14Q3 FY14Q2
Revenue 113.6 90.8 104.7 90.7 58.8
Gross Profit 18.4 14.6 16.0 11.7 5.7
Gross % 16.2 16.1 15.3 12.9 9.7
PBT 9.2 6.1 6.6 4.0 -0.5
PBT% 8.1 6.7 6.3 4.4
PATAMI 6.7 4.0 5.2 2.9 -0.3

Tin Rev 20.8 20.9 24.7 21.1 21.4
Tin PBT 2.7 1.3 4.4 1.3 3.3
F&B Rev 93.1 69.9 79.9 69.6 37.3
F&B PBT 7.3 5.2 3.0 3.0 -3.4

Total Equity 191.4 184.7 179.9 175.5 174.4
Total Assets 320.2 328.8 323.6 252.8 253.6
Trade Receivables 75.6 42.0 70.5 39.4 44.3
Inventories 112.6 148.2 125.0 81.8 74.1
Cash 21.8 28.9 25.5 31.1 38.7

Total Liabilities 128.9 144.1 143.6 77.2 79.0
Trade Payables 26.9 14.8 54.5 16.1 18.6
ST Borrowings 69.7 95.0 58.8 35.6 32.9
LT Borrowings 8.1 9.4 10.5 11.7 12.9

Net Cash Flow -3.7 3.4 -12.7 -7.1 0.6
CFOperation -6.6 -26.7 -28.7 -9.0 -6.3
Depreciation 3.8 1.9 7.1 5.3 3.5
CFInvestment -6.5 -6.5 -12.3 -6.7 -2.5
Purchase PPE 6.6 6.5 12.7 7.1 2.8
CFFinancing 9.4 36.5 28.3 8.7 9.4
FreeCF -13.2 -33.2 -41.4 -16.1 -5.8

Dividend paid 0.0 0.0 1.9 1.9 0.0

EPS 7.16 4.27 5.59 3.15 -0.27
NAS 2.05 1.98 1.94 1.88 1.87
D/E Ratio 0.29 0.41 0.24 0.09 0.04

Johotin's FY15Q2 financial result does not disappoint. It posts the highest ever quarterly revenue and second highest PBT in its history.

Compared QoQ, revenue increases by 25% to RM113.6mil and PATAMI jumps 68% to RM6.68mil.

While its tin manufacturing segment is still suffering from soft demand and higher material cost due to stronger USD, profit margin of F&B segment increases due to higher demand and lower milk powder price.

       Whole milk powder price: Getting even lower

Compared to preceding quarter of FY15Q1, inventories, borrowings and debt/equity ratio fall back to a more comfortable level but trade receivables has increased.

However, operating cash flow improves tremendously in current quarter and the company is able to make net short-term borrowings repayment of about RM25mil in FY15Q2.

Anyway, there is still a realised foreign exchange loss of RM1.5mil in current quarter but it has actually improved compared to RM2.7mil in FY15Q1.

The lower forex loss might be due to lower USD borrowings in FY15Q2. If operating cash flow continue to improve then it might have lower borrowings in Q3.

When I first invested in Johotin early this year, I expect at least RM20mil PATAMI in a year.

With RM10.7mil PATAMI at 1H15, Johotin is definitely on track to achieving this target.

If we annualize 1H15's earning, projected EPS for Johotin will be 22.9sen which means it is currently trading at PE ratio of just 6.4x at share price of RM1.47.

This makes Johotin super cheap as a consumer & dairy stock.

What's more, its new milk packaging factory is still not completed yet!

Johotin's management did mention earlier that this new milk packaging business can generate ~RM40mil revenue a quarter, or USD4mil a month, when fully operational.

Its management hoped that with this new venture, revenue in its F&B segment can hit RM250mil and above by FY15.

Currently at 1HFY15, revenue in its F&B segment has already reached RM163mil and it should surpass RM250mil easily by year end even without the contribution from milk packaging business which has been delayed.

I think the increase in sales is mainly because Johotin has successfully penetrated Central America market.

So, when milk packaging business starts to contribute probably in Q4, it should lift Johotin to a new height.


  1. Hi BD, can I know what is your target PE for Johortin as a consumer and dairy stock ?

    1. I'll give it PE of only 10x, just to be safe.

  2. One more question, I sometimes see you give differ target PE for differ stocks in your portfolio, can I know what criteria you use when determining the target PE ?
    In financial theory, I suppose growth rate is the major factor determining the target PE.

    1. I have no hard & fast rule for target PE. Normally I will give target PE of 10x. If the stock has high growth potential, then up to 15x. If the industry faces difficult time, then down to 8x. I just learn this from professional analysts :)

  3. I see, so I suppose the property industry is given 8x PE for the time being.
    I noticed PE for Globetronics is already >20, it is at the high side though it's growth visibility is good. Can I know why you don't sell it and invest into other lower PE growth stock to maximise the return ?

    1. I'm still searching for best investment strategy for me. Go all for low PE growth stocks, or stick with great companies long term like Buffet? I actually prefer the former more.

      If I think the company's financial performance can improve next year, most probably I will continue to hold.

      There are lots of reasons I'm still holding Gtronic at high PE
      1. High growth potential in 2016
      2. Good management
      3. Good dividends
      4. I don't have many shares actually
      5. Just feel good to be part of the company

  4. u're really a 高手,BD, coz u managed to anaylize the quality of earning in term of operating cash flow q to q.

    Now the price is at 1.56, but seems still very cheap

    1. I'm average only :) Still waiting for the new factory to improve its cash flow.