Tuesday, March 04, 2014

Latitude Trees (LT) Too Good To Ignore

LT is in the business of wooden furnitures. Its main raw material is rubber wood which is plentiful in Malaysia and Vietnam. It has 6 factories covering 7.8 million sq feet. That is  about 179 acres. Three of its factories are in Malaysia, two in Vietnam and one in Thailand. Below is a brief history of the company, sourced from its website:

"Latitude Tree Holdings Berhad was incorporated in Malaysia as an investment holding company. Through its subsidiary companies, the Group specialises in the manufacturing and sale of wooden furniture and components particularly rubber-wood furniture for both the domestic and export markets.
The Group has carved out a strong niche in the household furniture segment, specifically dining and bedroom sets. From its humble beginnings as a manufacturer of chairs for dining sets in 1988, the Group has grown into a complete high- and-medium-end dining and bedroom sets manufacturer. About 60% of its raw materials are rubber-wood-based with the remaining being oak, pine wood and other wood-based materials.
The Group has made great advances to position itself as one of the largest rubber-wood furniture manufacturers and exporters in Malaysia and Vietnam. Approximately 99% of the Group's products are exported overseas to the United States of America, Canada, Europe, South Africa, Australia and the Middle East countries. 
Manufacturing / Operating Activities
The Group's manufacturing activities are operated from its three factories in Malaysia, two factories in Vietnam and one factory in Thailand. The total floor area of the six manufacturing plants is approximately 7.8 million square feet. The total current workforce is about 7,500 workers."
The EPS of the company in the last 6 months ending 30.12.13 are just too good to ignore. The latest quarter is 19.52 sen per share, and the preceding quarter is 15.02 sen per share. Assuming that these kind of earnings are sustainable in the next 6 months, the full-year result will be 69 sen per share. 
 In view of its strong showings, especially in the latest 2 quarters, a PE ratio of 7 accorded to the stock is not illogical. This means the stock is worth RM 4.83 per share.
The company has a strong balance sheet with a current ratio of 1.598 and cash in the banks at RM154 million. Its paid-up capital is only RM97.208 million. Borrowings stand at below RM100 million.
At the present price of below RM2.60 per share, there is lots of value for money in the stock. 
As usual, you buy at your own risk.