PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 21 Jan 2021, 11:57 AM


Johore Tin Berhad - Improved Efficiency

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Johore Tin Berhad (JTB) reported net profit of RM15.7m (+5% YoY) in 3QFY20, mainly due to lower production overhead cost and one-off gain on disposal of machineries of RM0.8m. Excluding one-off items, its 9MFY20 core net profit was at RM32m (-11% YoY), was broadly in line our and consensus expectations. We adjust upwards our earnings estimates by an average 8% for FY20-22F as we expect further earnings uplift from improved cost efficiencies. Our Outperform call on JTB is retain with a higher SOPbased target price of RM2.20 (previously RM1.82) as we also raised our PE multiple for both Tin Manufacturing and F&B segment in our SOP valuation to 10x and 13x respectively (previously 8x and 11x), owing to improvement in consumption and steadier growth prospects (Table 3). We continue to like JTB for its growth potential on capacity expansion in the sweetened condensed milk facilities and upcoming contribution from the 43%-owned Able Dairies Mexico (ADM). During the quarter, JTB declared a third interim dividend of 2 sen, bringing its 9MFY20 dividend per share to 4.4 sen.

  • Improved margin on Tin Manufacturing. Revenue for its Tin Manufacturing segment declined 14% YoY to RM30.5m owing to lower sales in both local and export due to Covid-19 pandemic. Pre-tax profit however increased 17% YoY to RM7m from lower production overhead cost and one-off gain on disposal of machineries of RM0.8m. This brings its pre-tax margin higher to 23% (vs 17% in 3Q19). For 9MFY20, its pretax profit was flat at RM10.9m (+2%), though its sales declined 19% YoY to RM82m.
  • Higher QoQ sales on F&B. During the quarter, its F&B segment reported higher sales of dairy products to RM110m (+2% YoY, +25% QoQ), with a stable pre-tax margin of 13.2% (vs 13.8% in 3Q19) despite Covid-19 pandemic. For 9MFY20, sales for its dairy products declined 13% YoY to RM282m, with pre-tax profit dropped by 9.5% to RM33m.
  • Dividend. JTB declared a third interim dividend of 2 sen per share, bringing its DPS to 4.4 sen for 9MFY20. This translate to a dividend payout of 43%, in-line with our estimates payout of 43% for FY20F.

Source: PublicInvest Research - 25 Nov 2020

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