by S BIRRUNTHA / pic credit: ANNUAL REPORT
LATITUDE Tree Holdings Bhd’s share price continues to rise in the expectation that furniture makers stand to benefit from higher demand due to the Covid-19 pandemic stay-at-home and lockdown measures across various countries.
The company’s share price appears to be tracking gains in shares of other furniture makers and related resource players like Poh Huat Resources Holdings Bhd and Mieco Chipboard Bhd.
“Chartwise, the stock is on an uptrend with the next major resistance level at about RM3.85, and support at RM3.35 and RM3 level. Its push-up has been backed by increased volumes,” a technical analyst at a local brokerage told The Malaysian Reserve.
Despite management indicating the Covid-19 pandemic has been bad for its exports, Latitude Tree’s share price has risen by 67% since early September and was up 14 sen to RM3.51 last Friday.
The spike appears to be driven by investor expectations of its trading business in personal protective equipment rather than any fundamental change in its core wood-based furniture business.
In its most recent filing, the company stated that its indirect wholly owned subsidiary RK Resources Co Ltd (RKR) received a final insurance compensation relating to a fire incident in April 2018.
In a filing to Bursa Malaysia last Wednesday, the furniture maker noted that RKR agreed to a full and final settlement totalling 57.6 billion dong (RM10.4 million) from the insurer for the fire incident.
It added that RKR received an interim payment of 15 billion dong on Feb 13, which was recognised as “other income” in the financial year ended June 30, 2020 (FY20).
“RKR received the final insurance compensation of 42.6 billion dong on Nov 3 this year, and will recognise the compensation as ‘other income’ in the second quarter ended Dec 31, 2020 (2Q21),” it noted.
Back in April 2018, the company announced it incurred an estimated RM21.45 million in losses due to a fire at its major operating subsidiary in Vietnam.
The fire occurred at a factory building belonging to RKR which is located in the province of Binh Duong.
The building houses the unit’s assembly and packing line, inventories of work-in-progress and finished goods.
The fire damages comprise RM11.7 million loss on inventories, RM7.8 million loss on building and RM1.95 million loss on machinery.
Other manufacturing facilities in the area belonging to RKR were not affected and production has been running as usual.
Latitude Tree received an unusual market activity query from Bursa Malaysia in September this year over the sharp rise of almost 30% on its share price.
The company, in a Bursa filing reply, disclosed it was unaware of any corporate moves involving the company or its shareholders.
For its 4Q20, Latitude Tree’s net profit soared 104% to RM326,000 versus a net loss of RM8.58 million a year ago.
This came about despite its revenue falling by 13% to RM138.56 million from RM158.86 million for the same quarter last year.
The company stated that its improved year-on-year (YoY) earnings were contributed by the lower cost of sales and expenses, as well as lower taxation.
For FY20, Latitude Tree’s net profit fell 14% YoY to RM16.71 million as revenue shrank 6.14% to RM684.74 million due to lower sales as demand was impacted by the Covid-19 outbreak, though the decline was offset by a stronger US dollar against the ringgit.
Its yearly income was also affected by higher production costs amid lower production across all divisions, higher labour costs in Vietnam and Malaysia plants due to a rise in minimum wages, and an impairment loss on inventories of RM2.1 million.