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 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, Canada, Europe, South Africa, Australia and Middle East countries.

Based on Financial Year (FY) 2015 full year results, Latitude achieved RM710 million turnover, which is considered to be a small enterprise. Other aspects of the company’s latest financial results are illustrated in the table below.

Since FY2011, Latitude’s revenue has been on an increasing trend till FY2015 from RM500 million to RM710 million per annum, with the exception on FY2013 whereby the revenue experienced a dip to RM493 million. This represents a 42% increase in 5 years or an average year to year increase of 9.1%.

Similarly, its net profit has been on an increasing trend for these 5 years from RM12.8 million to RM79.7 million, which translates to a 5.2 times increase in 5 years or average year to year increase of 58%. Having a higher growth trend in net profit as compared to revenue is one off the most desirable characteristic of a growing company as it shows sound cost management and growing net margin of the company’s product.

Net profit margin wise, Latitude scores a reasonable 11.23% as well as having a good Return on Equity at 16.88%.

On company’s debt, Latitude has a total debt to equity ratio of 0.22, which is considered low and signifies that the company has relatively little borrowings as compared to its shareholder equity value. The company’s current ratio of 2.06 is very good and cash ratio of 0.99 is great too, meaning that the company is holding its asset as cash with a value equals to its current liability, at any point of time the company is able to pay off its current liability entirely through cash.

In terms of dividend, Latitude pays a reasonable 2.34% dividend yield which translates to 12 cents per share, an increase from 8.5 cents paid in FY 2014.

In summary, Latitude has sound financial performance and the company has been in a good shape although its shares price has decreased from recent high of RM8.10 to current level of around RM5.05. It is likely that the decrease in its share price is mainly due to gloomy economy outlook of the overall market instead of the company itself.

As 92% of the groups revenue comes from United States, the company’s future prospect will be highly depended on the US economy and USD to Ringgit exchange rates, whereby strengthening of USD will bring positive impact to the company’s revenue. Investors who believe that USD will be getting stronger against Ringgit shall consider taking position in this company with a longer term view of investment. Furthermore, currently its PE ratio is relatively low at 6.29.

Next quarterly results announcement should be on the month of Aug 2016 for Q4 results.

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Latitude

Latitude tree reached its peak of RM8.10 in Jan 2016 but reversed with 2B top reversal (Sign Of Weakness) and has been falling since then. Despite the spring (Sign of Strength) saw in Mar 2016, this stock continues to drift sideways within the range of around RM5.20 - RM5.80.

During current month of June 2016, Latitude continues to test lower and has closed a new 6-month low of RM5.05.

Has the downward movement stopped, you may ask? Unlikely but note that there is another spring (Sign Of Strength) detected last week and we need to observe further bars to assess if the down trend has stopped before deciding if it is the right time to accumulate.

Interested to learn more?

- Website https://www.ivsachart.com/events.php

- Email: sales@ivsachart.com

- WhatsApp: +6011 2125 8389/ +6018 286 9809

- Follow & Like us on Facebook: https://www.facebook.com/priceandvolumeinklse/

This article only serves as reference information and does not constitute a buy or sell call. Conduct your own research and assessment before deciding to buy or sell any stock. If you decide to buy or sell any stock, you are responsible for your own decision and associated risks.