Stock With Momentum: Johore Tin

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

Johore Tin Bhd (-ve)

SHARES of Johore Tin (Fundamental: 1/3, Valuation: 2.4/3) rose 2 sen or 1.1% to close at RM1.80 last Friday. Month-to-date, the stock and its warrants are up 16.1% and 76.5%, respectively. Bursa filings show that insiders took the opportunity to reduce their holdings last week.

Chairman Datuk Kamaludin Bin Yusoff and his wife sold a total of 102,000 shares at between RM1.795 and RM1.83. Post-disposal, Datuk Kamaludin ceased to be a substantial shareholder after his deemed interest of 4.8% fell below the 5% threshold.

Meanwhile, Goh Mia Kwong, who is the company’s largest shareholder, sold 250,000 warrants at an average price of 31 sen while director Yeow Ah Seng sold 294,666 warrants at an average price of 26 sen. The warrants traded at 17 sen at end-September.

Johore Tin derives 28% of its revenue from tin manufacturing and 72% from the F&B segment, which manufactures and sells milk and dairy products. The Johor-based company exports over 70% of its products to countries in Asia, Africa, and Central America — a new export market in 2014.

For 1H2015, revenue jumped 70% y-o-y to RM204.4 million due to a 111% increase in F&B sales. Net profit surged 121% to RM10.7 million, driven by better sales margins and a low base from the F&B segment.

Tin manufacturing’s profit, however, slumped 41% to RM4 million despite sales dropping only 3% to RM41.4 million. This was attributed to the strengthening USD which resulted in higher raw material costs and lower margins.

Johore Tin’s new milk and dairy products manufacturing plant in Teluk Panglima Garang, Selangor is slated for completion in 2015. It is expected to boost F&B production capacity by more than 25%.

The stock trades at a trailing P/E of 8.8 times and 0.9 times book.