Insider Asia’s Stock Of The Day: LTKM

by **Cals** Thu 12 Feb 2015, 19:04

Insider Asia’s Stock Of The Day: LTKM

By InsiderAsia / InsiderAsia | February 12, 2015 : 1:00 PM MYT

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LTKM (Fundamental: 2.7/3, Valuation: 2.4/3) has one of the strongest balance sheets amongst poultry-related companies in Malaysia. Net cash stood at RM8.3 million, or 19.2 sen per share at end-Sept 2014, in an industry where most players are highly geared. LTKM was started by the Tan family way back in 1976, as a small 10-acre farm in Kampung Jawa, Klang. The company has since expanded into a 400-acre highly automated, bio-secure farm in Malacca and is the single largest layer farm in Malaysia. LTKM remains tightly held by its founders (61% stake). Current capacity totals 1.4 million eggs per day, including its famous Omega-3 eggs marketed under the LTK Omega Plus brand. Over 40% of eggs produced are exported to Singapore and Hong Kong with the balance sold to local wholesalers. The stock is trading at a trailing 12-month PE ratio of 6.8 times and P/BV of 1.25 times. Thanks to its strong balance sheet, the company has been able to maintain relatively consistent dividends, even when earnings dipped sharply in FY Mar 2012. Dividends ranged between 10 sen and 13 sen per share in FY2010-FY2013. For FY2014, dividends were raised to 18 sen, translating into net yield of 3.5%, in line with improved earnings. Return on equity rose to 19.4% in the latest financial year. Earnings, however, can be volatile — due to the volatility of major raw materials, corn and soybean. For 1H2015, sales increased 8.4% y-o-y to RM93.4 million while pre-tax profit rose 38.7% to RM21.0 million. The outsized increases in profit and margin were due to higher selling prices for eggs and lower raw materials costs. While commodity prices remain relatively low, the weaker ringgit may raise costs in the near to medium term.

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This article first appeared in The Edge Financial Daily, on February 12, 2015.
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