Saturday, 30 July 2016

Johore Tin (9) - Decent Results. HOLD

Publish date: Mon, 30 May 2016, 08:14 PM 

1. Latest Quarter Result

Johotin released March 2016 quarterly result today. Please refer to table below for details :-

Key observations :-

(a) Net profit came in at RM4.5 mil, translating into EPS of 4.8 sen. For me, this is satisfactory, especially after the disastrous past two quarters. 

(b) This quarter's result contains very little exceptional items (RM0.2 mil only).

(c) Surprisingly, the tins and can manufacturing division performed very well. PBT of RM3.7 mil is the highest in 5 quarters.
However, the Company sticks to its sombre narrative of "if the material cost remain unfavorable in the short term, the group may have to adjust the selling price accordingly".
That is strange, I thought they should be happy ?

(d) The dairy division's performance is a bit disappointing. Its PBT of RM2.6 mil was significantly lower than the RM7.3 mil reported in June 2015 (which caused the share price to run wild... those crazy days...). Without that kind of exciting earnings, Johotin will be stuck at the current range of RM1.50 to RM2.00.
Anyway, we all know the story - they are building the new factory and machinery which upon completion, is supposed to make them super competitive and boosts profit margin.
I am keenly waiting for that to happen... 

2. The New Factory

The new factory for the milk powder packaging subsidiary (80% owned Able Food Sdn Bhd) is supposed to start production by end of last year / early this year, but there is still no news of it until now.

However, according to the FY2015 annual report, the money has already been spent :-

As usual, management is upbeat about its potential :-

(Source : FY2015 annual report "Forward Looking Statement")

Let's see how things work out going forward. At current price of RM1.86, I rate the stock aHOLD.

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