Johotin: Too Much Expectation

Johore Tin FY15Q3 Financial Result

JOHOTIN (RM mil)	FY15Q3	FY15Q2	FY15Q1	FY14Q4	FY14Q3
Revenue	97.9	113.6	90.8	104.7	90.7
Gross Profit	12.1	18.4	14.6	16.0	11.7
Gross %	12.4	16.2	16.1	15.3	12.9
PBT	4.4	9.2	6.1	6.6	4.0
PBT%	4.5	8.1	6.7	6.3	4.4
PATAMI	3.3	6.7	4.0	5.2	2.9
Tin Rev	20.4	20.8	20.9	24.7	21.1
Tin PBT	0.5	2.7	1.3	4.4	1.3
F&B Rev	77.3	93.1	69.9	79.9	69.6
F&B PBT	4.4	7.3	5.2	3.0	3.0
Total Equity	191.5	191.4	184.7	179.9	175.5
Total Assets	307.2	320.2	328.8	323.6	252.8
Trade Receivables	62.3	75.6	42.0	70.5	39.4
Inventories	94.6	112.6	148.2	125.0	81.8
Cash	33.9	21.8	28.9	25.5	31.1
Total Liabilities	116.2	128.9	144.1	143.6	77.2
Trade Payables	21.0	26.9	14.8	54.5	16.1
ST Borrowings	63.7	69.7	95.0	58.8	35.6
LT Borrowings	7.0	8.1	9.4	10.5	11.7
Net Cash Flow	8.3	-3.7	3.4	-12.7	-7.1
Operating CF	18.3	-6.6	-26.7	-28.7	-9.0
Depreciation	5.1	3.8	1.9	7.1	5.3
Investment CF	-8.4	-6.5	-6.5	-12.3	-6.7
Purchase PPE	8.6	6.6	6.5	12.7	7.1
Financing CF	-1.6	9.4	36.5	28.3	8.7
FCF	9.7	-13.2	-33.2	-41.4	-16.1
Dividend paid	3.3	0.0	0.0	1.9	1.9
EPS	3.52	7.16	4.27	5.59	3.15
NAS	2.05	2.05	1.98	1.94	1.88
D/E Ratio	0.19	0.29	0.41	0.24	0.09

Johotin's share price dropped 20% from RM2.80 to RM2.24 in a single day after the announcement of its latest FY15Q3 result.

It's like it has suffered loss or is facing quality issue again.

Without a doubt, Johotin's latest quarterly result is a disappointing one.

Its revenue drops 13.8% while PATAMI drops 50.7% compared to record-breaking immediate preceding quarter.

Stronger USD against MYR is not good for Johotin, as it suffered net forex loss in the past few quarters. So it is expected that there is no escape from losing on forex this time.

I think most investors are anticipating a phenomenal result from Johotin due to recent low raw material price, and excellent performance by its peers.

Nevertheless, Johotin's gross margin actually drops compared both QoQ and YoY, resulting in a poorer result.

I think the main issue for this financial result is lower revenue from F&B and increased cost for tin manufacturing.

There is a RM0.8mil realized forex loss and RM0.5mil derivative gain in this quarter.

On the positive side, cash flow improves with positive free cash flow, while increased cash lowers debt/equity ratio further to 0.19.

Since early Oct15, Johotin's share price rallied non-stop from RM1.50 to RM2.80 before it dived. 

Though it has already exceeded my target price, I did not sell because I thought that it might post a good result.

Furthermore, the price of RM2.80 is actually not too "overpriced" if we expect Johotin to perform better in the future. 

If EPS of FY15Q3 just stays flat with FY15Q2 at 7.16sen, the share price of RM2.80 seems to be quite fair.

Anyway, the truth is that Johotin can't sustain its earning in this quarter.

Can it rebound in the next quarter?

I really don't know. It can get better or get worse.

Johotin's new milk packaging factory seems not ready yet at this time, and the completion might be delayed to FY16.

Once the new factory is in operation, surely revenue will pick up and hopefully its profit will follow.

So I think the chance of it to get better is higher.