LATITUD (7006) : Reaching high altitude
For QE31/12/2014, Latitud's net profit rose 65% q-o-q or 44% y-o-y to RM27.4 million while revenue increased by 7.6% q-o-q or 2.5% y-o-y to RM189 million. Revenue grew y-o-y due to higher orders received, strengthening of US Dollar against Ringgit Malaysia; and overall higher production output by all the factories of the Group. PBT increased y-o-y due to the substantial increase in gross profit due to better gross profit margin; lower finance costs due to decrease in total bank borrowings; and increase in unrealised foreign exchange gain
Table 1: Latitud's last 8 quarterly results
Chart 1: Latitud's last 38 quarterly results
Valuation
Latitud (closed at RM5.23 this morning) is now trading at a PE of 7.8 times (based on last 4 quarters' EPS of 67.4 sen). At this PE, Latitud is deemed fairly attractive. However, we have to be wary not to fall into the trap of buying into (or holding onto) a stock with its earning at a cyclical high. That happens when all the good positives are in and the share price reflects that.
Technical Outlook
Latitud had rallied ever since it broke above its intermediate downtrend line in December 2012 (see my earlier post). It had surprised me by exceeding the February-March 2010 high of RM1.75 (see my follow-up post). If we do a projection using the monthly chart below, we can argue that the potential target could be as high as RM5.30-5.50.
Chart 2: Latitud's monthly chart as at Feb 12, 2015 (Source: ShareInvestor.com)
Conclusion
Based on better financial performance & attractive valuation, Latitud is a good stock for long-term investment. However, I think that Latitud is due for some profit-taking. I would rate it a SELL INTO STRENGTH.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Latitud.
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