Latitud: A Good Q3

Latitude Tree FY15Q3 Financial Result

LATITUD	FY15Q3	FY15Q2	FY15Q1	FY14Q4	FY14Q3
Revenue	165.6	189.1	175.7	142.8	146.8
Gross Profit	27.5	34.4	26.2	20.3	23.8
Gross%	16.6	18.2	14.9	14.2	16.2
PBT	21.3	29.5	18.5	10.3	14.8
PBT%	12.9	15.6	10.5	7.2	10.1
PATAMI	19.5	27.4	16.6	8.7	12.8
MAS Rev	47.7	32.1	27.7	23.4	32.3
MAS PBT	5.4	5.4	2.3	-0.7	3.0
VIET Rev	125.8	149.4	141.0	114.4	108.1
VIET PBT	14.4	22.6	14.8	13.0	10.9
THAI Rev	9.0	5.6	5.8	5.0	6.4
THAI PBT	1.1	0.7	1.0	-0.4	-0.1
Total Equity	390.1	366.6	327.2	308.2	296.8
Total Assets	575.6	548.6	502.8	475.3	475.5
Trade Receivables	63.3	63.4	59.9	37.0	49.1
Inventories	109.7	103.9	97.4	93.5	90.7
Cash	142.1	151.3	124.0	123.1	109.0
Total Liabilities	184.3	181.0	173.1	167.9	179.3
Trade Payables	75.0	89.9	91.7	79.1	77.7
ST Borrowings	90.4	82.6	74.8	78.8	91.4
LT Borrowings	17.1	6.1	6.4	7.9	8.9
Net Cash Flow	-1.0	15.9	-1.6	26.5	11.5
Operation	22.8	22.2	6.1	81.2	55.5
Investment	-34.8	-7.5	-2.7	-37.6	-34.0
Financing	3.6	-2.2	-6.1	-18.5	-5.8
Dividend paid	8.3	0.0	0.0	6.1	6.1
EPS	20.07	28.19	17.13	8.93	13.12
NAS	4.01	3.77	3.37	3.17	3.05
Net D/E Ratio	NC	NC	NC	NC	NC

If you look at Latitude's past earning records, Q3 (Jan-Mac) is its poorest period in the whole financial year due to lower demand in US post New Year/Christmas festive period and shorter working days.

It even made loss in Q3 of FY11 & FY12.

This year its FY15Q3 result is even better than FY15Q1 despite slightly lower revenue. This is mainly due to forex gain of RM2.9mil in current quarter.

FY15Q3's revenue can be even better if not because of lower shipments to US due to its West Post strike.

Compared YoY, revenue, PBT & PATAMI increase 13%, 44% and 52% respectively, though Vietnam operation only contributed partially to its bottom line in FY14Q3.

Overall it's a good result for me.

There is a significant increase in Malaysia's revenue by almost 50% compared to last quarter but PBT stays flat. Is it a contribution from the laminating facility acquired last year?

Despite having a net cash of more than RM60mil, Latitude still has a net drawdown of borrowings of RM14.4mil in FY15Q3 alone.

What is this borrowings for?

It has spent RM28.7mil so far in FY15 in purchasing PPE, with RM22mil used in the acquisition of laminating facility.

As the management is not keen to pay higher dividend to its shareholders, I'm keen to know what kind of expansion plan they have with such a good cash on hands.

Hopefully some investment banks will start to cover Latitude Tree and write more detail about its current and future plans.

The US West Port strike seems to have settled towards the end of Feb15. This issue actually persist for 9 months before it ends.

So I would expect normal or may be more shipment to US for Latitude in its FY15Q4.

Latitude's cumulative 9-months PATAMI of RM63.5mil has surpassed FY14 full year figure of RM55mil. I expect it to post at least RM80mil PATAMI for FY15.

Thus, guesstimated EPS for FY15 will be 82.3sen.

I hope that its management will payout 30% of its net profit as dividend in FY15. This will be about 25sen or 4% yield at share price of RM6.

About bonus issue, Latitude has past record of giving bonus issue in year 2011. I predict that it might do it again in the near future but it will be OK for me if there is none.

For me, it's better if Latitude can expand its market presence out of US, increase its production capacity, or making strategic acquisition.