Latitude: Reaching A New Altitude

Latitude Tree FY15Q2 Financial Result

LATITUD	FY15Q2	FY15Q1	FY14Q4	FY14Q3	FY14Q2
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?

Matrix: Special CNY Ang Pow

Matrix FY14Q4 Financial Result

MATRIX	FY14Q4	FY14Q3	FY14Q2	FY14Q1	FY13Q4
Revenue	151.0	148.8	163.7	134.7	144.3
Gross Profit	97.5	83.8	74.6	67.8	78.5
Gross%	64.6	56.3	45.6	50.3	54.4
PBT	73.8	58.5	58.6	54.0	56.4
PBT%	48.8	39.3	35.8	40.1	39.1
PAT	56.5	45.1	42.4	38.6	40.7
Prop Rev	150.5	148.8
Prop OP	77.6	61.2
Edu Rev	0.5	0.0
Edu OP	-2.9	-1.9
Club Rev	0.0
Club OP	-0.4
Total Equity	686.0	643.5	613.5	582.0	552.4
Total Assets	996.2	1000.9	944.5	964.5	900.5
Trade Receivables	79.5	174.9	160.0	144.3	140.8
Prop dev cost	566.2	556.3	524.4	523.5	443.8
Inventories	2.1	0.7	0.7	0.7	1.6
Cash -OD	58.7	23.3	29.4	96.0	83.8
Total Liabilities	310.2	357.4	331.1	382.5	348.1
Trade Payables	195.7	274.7	253.7	299.3	245.7
ST Borrowings	42.3	23.6	32.2	34.4	35.5
LT Borrowings	35.8	21.4	1.5	13.2	15.3
Net Cash Flow	-10.1	-45.5	-39.4	27.2	53.4
Operation	130.0	65.3	68.8	85.6	39.7
Investment	-93.2	-63.9	-55.7	-29.4	-69.2
Financing	-46.9	-46.9	-52.5	-29.0	82.9
Dividend paid	77.6	60.5	45.3	30.1	46.2
EPS	12.40	10.50	14.00	12.80	13.50
NAS	1.50	1.41	2.02	1.92	1.83
D/E Ratio	0.03	0.03	0.01	Net cash	Net cash

Matrix has just released a magnificent FY14Q4 results yesterday. Though revenue inches up by a mere 1.5% QoQ, PATAMI jumps 25% to a record high of RM56.5mil since listed.

This is mainly contributed by record high gross margin at 64.6%. However, there is no mention about how much of industrial land sales with higher margin is recognized in current quarter.

For the whole FY14, Matrix's revenue improves 4.3% to RM598.3mil from RM573.5mil in FY13, whereas PATAMI rises 20.4% from RM151.6mil to RM182.6mil.

Average ROE improves to 29.5 in FY14.

Industrial land sales make up 24% (RM144.7mil) of the whole FY14 revenue.

New property sales in FY14Q4 reaches RM182mil, up from RM158.5mil in previous quarter. However, total new property sales (including new land sales) drops to RM630.2mil in full FY14 from RM788mil in FY13.

Unbilled sales manage to increase slightly this quarter to RM429.3mil from RM410.5mil in 3rd quarter of FY14.

Matrix International School and Matrix Private School have started operation in Sep14 and Jan15 respectively. Its education segment is still in red with an operating loss of RM2.9mil in this quarter and accumulated loss of RM4.8mil so far.

The schools have 320 students enrollment as at Dec14 and the management targets 800 students by the end of 2015.

The inclusion of Matrix Private School and d'Tempat clubhouse in the first quarter of FY15 might add a bit to its revenue in FY15Q1 but loss in early operation is still expected.

Nevertheless, Matrix global schools and clubhouse will add to the appeal of its township Bandar Sri Sendayan.

       d'Tempat Clubhouse

Matrix will launch Hijayu 2 (phase 1) and Sendayan Merchant Square Shop Offices (phase 1) in the first 3 months of 2015. I believe that the commercial properties will sell like hot cakes.

It targets to launch RM1bil worth of properties in FY2015.

At the same time, Matrix declared its 4th interim rim dividend of 5.25sen, together with its first ever special dividend of 1.25sen.

Matrix pays a total of 17.33sen (adjusted to 1:2 bonus issue for 1st interim dividend) for its FY14 representing RM77.2mil or 42.3% payout from its FY14 PATAMI.

Dividend yield will be 6% at share price of RM2.90.

Matrix's actual EPS for FY14 reaches 39.9sen, its PE ratio is at 7.3x.

I will give it a fair PE of 8 in current challenging property market so my target price for Matrix will be RM3.20.

This target price will be lower than my previous TP of RM3.50 base on PE of 10x. It just serve as a reference for myself and actually not that important if you plan to hold the shares for long term.

I will continue to hold Matrix's shares and continue to monitor its FY15 financial results.

Inari: Another Record-Breaking Quarter

Inari FY15Q2 Financial Result

INARI	FY15Q2	FY15Q1	FY14Q4	FY14Q3	FY14Q2
Revenue	227.9	221.9	223.9	191.8	186.6
Gross Profit	49.4	43.4	52.0	40.9	37.4
Gross%	21.7	19.6	23.2	21.3	20.0
PBT	40.0	33.9	31.4	27.2	26.6
PBT%	17.6	15.3	14.0	14.2	14.3
PAT	40.3	33.8	30.8	25.0	24.4
Total Equity	352.9	313.4	260.2	231.1	202.2
Total Assets	583.5	544.3	487.5	461.4	438.8
Trade Receivables	128.1	143.4	137.3	131.8	123.5
Inventories	134.0	135.8	137.8	137.7	126.2
Cash	141.9	89.5	65.3	53.2	60.0
Total Liabilities	230.6	230.9	226.9	231.1	236.9
Trade Payables	107.3	107.9	120.0	118.4	131.2
ST Borrowings	44.8	46.8	36.4	33.0	26.2
LT Borrowings	14.9	15.1	18.6	15.8	16.4
Net Cash Flow	65.0	14.0	20.9	8.8	15.3
Operation	88.3	23.7	41.2	12.4	11.5
Investment	-44.9	-34.4	-43.4	-30.4	-14.5
Financing	21.5	24.7	23.0	26.9	18.4
EPS	6.59	6.00	6.23	5.19	5.31
NAS	0.58	0.56	0.53	0.48	0.42
Net D/E Ratio	Net cash	Net cash	Net cash	Net cash	Net cash

As widely expected, Inari posted a record high revenue, PBT & PATAMI for its latest quarter of FY15Q2.

The better results are due to higher trading volumes, favourable foreign exchange & gold price.

How much has Inari gained from foreign exchange? 

We might get a clue from its cash flow statement.

It seems like Inari registers unrealized foreign exchange gain of RM9.2mil in the first 6 months of its FY15.

Another thing noteworthy is that its cash suddenly jumps about 60% (+RM52.4mil) in 3 months time from RM89.5mil to RM141.9mil.

This is mainly contributed by strong operating cash flow while warrant conversion added RM11.3mil of cash in this quarter.

Once its rights issue is completed in the end of Feb15, it will add another RM115mil to its cash pile.

Inari declared a second interim of 1.8sen plus a special dividend 0.5sen. The total of 2.3sen is 0.1sen higher than its 1st interim payout.

The dividends will be ex-ed very soon in 10 days time on 16 Feb 2015 but will only be paid one month later. So it's a belated CNY ang pow :)

Div (sen)	FY15	FY14	FY13	FY12
1st	1.8 (0.4)	1.1 (0.4)	0.8	0.6
2nd	1.8 (0.5)	1.1 (0.4)	0.9	0.6
3rd		1.2 (0.8)	0.9	0.8
4th		1.8	1.0 (0.9)	0.8

Inari has just increased the capacity of its RF division which is expected to contribute from the 2nd quarter of CY2015 (FY15Q4). So I would expect better earning from Inari for its 2HFY15.

The extent of capacity increase reported by HLIB & Maybank is different:

Maybank: 522 + 80 to 90 units test machines
HLIB: 422 + 100 units test machines

I think it is roughly a 20% increase in capacity in phase one of expansion.

With better outlook, I think I should increase Inari's target net profit from RM140mil to RM155mil for FY15. I will only set my adjusted target price after the completion of rights issue.

Inari does not mention about the performance of its various business segment ie. RF, fiber optics, opto-electronics in its quarterly report. So we have to depend on analysts for the info.

Recently various China-brands smartphones such as lenovo, oppo, vivo etc are penetrating into Malaysia and other countries aggressively. I think shareholders of Inari & Gtronic must be very keen to know whether their products are used in these smartphones.

It's Huayang Again

Just 4 days after it announced its foray into Penang property market, Huayang announced another proposed land acquisition in Kuala Lumpur.

It will acquire an 8.1-acres leasehold land in Mukim Batu for RM120mil. This works out to be about RM340 per sq ft.

In Oct11 which is 3 years ago, UOADev acquired freehold land in the same mukim at a cost of RM170 psf only.

According to Huayang's announcement, the current market value for its land is RM121mil and it got a RM1mil discount.

Just for reference, in year 2013, Matrix acquired 2 pieces of freehold land in the heart of Kuala Lumpur near PWTC for RM950 psf.

To recap, Huayang paid RM124 per sq ft (total RM158mil) for its 29.2 acres leasehold Puchong West land which does not carry KL address back in year 2012.

Is RM340 psf really the current market price in Mukim Batu now?

The land deal is expected to be completed in the second half of year 2015, and development is only expected to start in the final quarter of year 2016.

There is still no concrete development plan for it yet but potential GDV is estimated at RM800mil.

So Huayang will spend RM151mil for recent proposed land acquisition in Penang & KL. This will likely push up its net gearing ratio from 0.5x to 0.7x-0.8x region.

It might still have pending land deal in Kota Kinabalu!

With high debts, can Huayang survive amid poor sentiment in general and property market in Malaysia?

Land price will always increase with time, so it's always better to acquire them sooner rather than later.

I'm not sure where is the exact location of its KL land. It seems like it will be next to the busy MRR2 in Kepong/Segambut/Selayang?

As long as the land is strategically located, then I think it is a good decision.

       Huayang's land: next to Batu Caves, Sentul, Kepong & Selayang

With its annual net profit expected to be around RM100mil for the next 2 years, I guess it should have no problem to serve its loans in the near future.

Huayang might launch its new projects in Puchong & Seri Kembangan soon in this year. Sales from these 2 projects will be important to its sales target of RM529mil in FY16 ending Mac16.