Highlights

Johore Tin Berhad- Expect Improvement in 2H20

Date: 17/06/2020

Source  :  PUBLIC BANK
Stock  :  JOHOTIN       Price Target  :  1.82      |      Price Call  :  BUY
        Last Price  :  1.95      |      Upside/Downside  :  -0.13 (6.67%)
 


Johore Tin Berhad (JTB) reported a net profit of RM4.5m for 1QFY20, down 59% YoY. This came in below our and consensus expectations at 12% and 13% of full-year forecast respectively. The discrepancy was mainly due to slower sales from both its Tin Manufacturing as well as F&B segment owing to Covid-19 pandemic and reduction in production output due to the Movement Control Order (MCO) where workforce was limited to 50%. We adjust downwards our forecasts by 9-40% for FY20-22F, to account for lower sales, couple with an expectation of a delay in the commissioning of its 40%- Able Dairies Mexico plant to 2HFY21. As a result, our target price is also lowered to RM1.82 (previously RM2.11), based on SOP valuation. Nevertheless, we continue to like JTB for its growth potential from capacity expansion in the sweetened condensed milk facilities and upcoming contribution from the new Mexico plant. Our revised TP implies an upside potential of 18% and therefore, we retain our Outperform call. During the quarter, JTB declared a 1st interim dividend of 0.7 sen for FY20 (vs 1.50 sen for 1Q19).

  • Revenue. JTB reported lower YoY revenue for 1Q20 to RM108m, compared to RM141m in 1Q19. This was mainly due to lower sales recorded from both its tin manufacturing (-26%) and F&B (-23%) segments owing to Covid-19 pandemic and MCO. The declined in sales of its Tin Manufacturing operations was due to the slow-down in exports by its customers upon the declaration of Covid-19. Some of their customers whose operations were not under essentials sector were also not able to operate during the MCO period. On the other hand, we understand that during the MCO period, its production for both segments were lowered as its workforce was limited to only 50%.
  • Net profit. JTB’s net profit declined 59% YoY in 1Q20 to RM4.5m, compared to RM11.1m in 1Q19. Excluding forex loss of RM2m in 1Q20, core net profit was at RM6.5m (-41% YoY). The Group’s pretax margin fell to 6.3% in 1Q20, compared to 9.2% in 1Q19, in line with the drop in sales.
  • Dividend. JTB declared a single-tier first interim dividend of 0.7 sen per share. The payment and entitlement date will be determined at a later date. The dividend payout was at 48% compared to 42% in 1Q19.
  • Outlook. We expect a gradual improvement in its performance in the 2HFY20, supported by global economic recovery and couple with ramp up production post MCO period. JTB foresee that its F&B segment to continue to be profitable despite volatility in raw material prices, uncertainties in global economy and recent impact on the Covid-19 pandemic. As at 1Q20, JTB was at net cash position of RM14.3m.

Source: PublicInvest Research - 17 Jun 2020

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Chart Stock Name Last Change Volume 
JOHOTIN 1.95 -0.04 (2.01%) 1,330,300 

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