Red Alert to all Investor, Trader and Punter of KLSE.
Today need to informed everyone of this champion stock of 2019, which is Johotin.
Johotin sound like a tin manufacturing
company for you at first sight. While this is not entirely wrong, it is
important to know that Johotin already diversified their core business
into F&B manufacturing which focuses on dairy related products. Now,
the revenue and profit generated from diary division had surpassed the
one from tin manufacturing.
Taken out from the previous quarterly
report, you can see that F&B contributed 75% on revenue, and around
67% on profit before tax. This is to note that contribution from the
F&B division do not resemble a full capacity operation mode.
The very reason I am writing this is to
tell about the potential of the investment in Mexico that will give
Johotin the ultimate bottom line boost in the future revenue and profit.
Although this expansion is very big and
crucial for Johotin, but it had been lacking of coverage from analyst,
which is why I am here to do the noble job of informing all the
investor, trader and punter alike to be on the look out for Johotin.
First of all, currently all the operation
are processed in Malaysia, which means milk powder are sourced from
overseas, tin plates locally, and sugar are purchased on Malaysian
market price.
According to the local prices, 1kg of
Sugar will cost RM 2.85 for coarse sugar, and RM 2.95 for fine
granulated sugar. But most of you do not know that at the international
level, sugar price is actually trading around RM 1.20 per kg. This means
that manufacturer in Malaysia is paying more than double on the
international price.
Sugar prices had been in a depressed
mode, and is trading at the range of 13 cents for 1 pound, which is
around RM 1.17 per kg (based on exchange rate USD 1 to RM 4.10)
If Johotin is to move it's production
into Mexico, the raw material of Sugar will be greatly decrease, hence
increasing operating profit. It makes good sense to set up factory in
Mexico because Mexico is the top 10 (rank no.6) in sugarcane production,
which will put sugar trading at competitive prices.
Question now - If Johotin sugar price
input from the current RM 2.85 shrink down into RM 1.20 per kilogram,
what is the positive impact in terms of operating profit.
To answer you this good question, I have
to show you some projection which is done by professional analyst. This
is taken from TAOnline research paper.
For every 5% increase in raw material cost within the F&B segment, Johotin net profit is expected to decline 34%.
So, if raw material decrease 5%, will net profit increase 34% ? I think probably not.
But, what if raw material decrease 57%,
from RM 2.85 to become RM 1.20 per kilogram ? Will Johotin profit at
least increase 50% ? I believe that this can be within the range of
expectation.
As I had already outlined, not many
analyst and investor noticed about Johotin coming future potential and
earning power. At RM 1.20, I think Johotin is still very reasonably
undervalued and much more potential to be unveiled in the future.
I had to be honest that I had held
Johotin for more than 1 year, buying from RM 1.1x until 0.8x and is
still buying and keeping, because I will definitely believe that Johotin
will be the future Dutchlady in the making. Solid business, steady
revenue and steady dividends.
My advice to you is to grab it before fund manager and unit trust start to add Johotin into their fund portfolio.
https://klse.i3investor.com/blogs/targetinvest/191393.jsp
https://klse.i3investor.com/blogs/targetinvest/191393.jsp
