Since our initial coverage (www.the1994investor.com) of Johotin back on 7 December 2020, Johotin’s share price has been stable, ranging between RM1.70 – RM2.00. For FY20, Johotin announced a total dividend of 5.4 cents / 2.8% dividend yield based on an entry price of RM1.90.
In this article, we provide an update on Johotin’s latest financial results (4Q2021), announced on 19 March 2021.
UPDATE ON LATEST QUARTER (OCT – DEC) RESULTS
Compared to the preceding quarter, Johotin’s revenue decreased by RM2.7m / 1.9% to RM137.9m. The decline was mainly due to lower sales from its F&B segment caused by higher freight costs which led to cancellation/push back of orders by its overseas customers.
Profitability-wise, Johotin’s gross and net margins were impacted more severely with an overall drop in net profit of RM7.8m / 50.2%. Factors contributing to the declines were:
- Higher raw material costs i.e. milk, sugar and steel during the quarter
- Delay in price adjustments to customers order for the tin segment
- One-off gain from the disposal of property, plant and equipment of RM784k in 3Q2021
UPDATE ON FY2020 (JAN – DEC) RESULTS
On a full-year basis, Johotin’s revenue and net profit dropped by 13.4% and 15.6% respectively. Factors leading to the decline were:
- Higher raw material costs and
- Decrease in production and customer orders during the peak of pandemic during 1H2020, and the recent surge in freight cost which led to a push back of customers’ orders
Moving into FY2021, we expect the Group’s business to remain challenging given the increasing price of commodities.
There were no major news / developments on the Group, since our initial coverage.
Do refer to Johotin’s latest corporate presentation dated December 2020 for in-depth updates on the Group’s operation.
With reference to Johotin’s latest quarter results, we have made slight adjustments to our projection on Johotin’s FY2021 full-year results, as below.
At the last closing price of RM1.80, the market is valuing Johotin at 15x PE based on our base case assumption of RM36.8m in net profit. We opine current valuation as fair given the challenging prospects forward and the little visibility we have on the progress of Mexico’s joint venture.
In the near term, we expect Johotin’s share price to retrace given its recent poor performance and the adverse outlook. Nonetheless, in our views, Johotin’s business fundamentals and industry landscape remain unchanged as before.
We remain confident with the business and management team given their experience and track record when dealing with this cyclical adversity.
To recap, several key risks and opportunities associated to the Group include: