Stock With Momentum: Lee Swee Kiat Group

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This article first appeared in The Edge Financial Daily, on March 4, 2016.

 

Lee Swee Kiat Group Bhd (-ve)

SHARES of Lee Swee Kiat (LEESK) (Fundamental: 2.1/3, Valuation: 1.1/3) continued to rise yesterday, gaining 1.5 sen or 5.36% to close at 29.5 sen. Some 2.7 million shares changed hands.

The company released its results for the fourth quarter ended Dec 31, 2015 (4QFY15) on February 25, which saw net profit increase 26.2% year-on-year to RM2.4 million from RM1.9 million. Revenue, however, declined 14.3% to RM19 million, on poor domestic sales after the implementation of the goods and services tax on April 1 last year.

Quarter-on-quarter, net profit grew 190.4% from RM832,000, thanks to higher sales, better margins and favourable foreign exchange.

For the full year, while revenue remained flat, net profit expanded 20.9% to RM5.0 million.

Going forward, the company expects challenging times ahead, due to uncertainties in the world economy and poor consumer sentiment.  Factors which may have a direct impact on its performance include fluctuation in raw latex price, changes in exchange rate, as well as consumer sentiment and spending confidence. The health of the property sector and the implementation of higher levy for foreign workers may also impact its performance directly.

LEESK is involved in the manufacturing, trading, and distribution of mattresses, bedding accessories, laminated foam, polyurethane foam, natural latex foam and other related products. Its brands include Napure, Englander, and Tempur.

More than 50% of LEESK’s products are exported, throughout South East Asia, Australia, US and Europe. LSK operates a retail chain store under International Brands Gallery (IBG), which promotes ergonomic beddings and furniture.

From 2010 to 2013, revenue hovered between RM60.7 million and RM62.9 million before jumping to RM73.2 million in 2014, while net profit ranged between RM1.1 million to RM2.1 million over 2010 to 2013 before increasing to RM4.1 million in 2014.

The stock trades at a trailing 12-month P/E of 9.5 times, and 1.3 times book.

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