INSTEAD of solely glazing through the crystal ball of Koon Yew Yin a.k.a Uncle Koon – the investor genius likened to the Malaysian version of Warren Buffet – it makes valid sense to occasionally compare notes with the professionals.
This makes valid sense as Lotte Chemical Titan Holdings Bhd (LC Titan) – Uncle Koon’s latest stock mention (as opposed to recommendation which is strictly prohibited by the Securities Commission) – comes under the radar of a few local research houses.
Even after having breached the RM3 level in recent times, its share price was still a 50% discount from its initial public offering (IPO) price of RM6.50 in July 2017.
On his fascination with the petrochemical producer, Uncle Koon opined that LC Titan has an excellent profit growth prospect.
“COVID-19 pandemic is affecting almost all the listed companies that are showing reduced profit,” he justified in his blog which is accessible through the popular I3investor platform.
“During this period, production of gloves, face masks, liquid, soap, etc have increased to prevent the virus. The production of all these products require chemicals from LC Titan.”
Based on its excellent profit growth, Uncle Koon expects the company’s next quarter ending June 30, 2021 to be better than the earnings per share of 19.36 sen recorded for its 1Q FY2021 ended March 31, 2021.
Uncle Koon is spot on this time around given his projection is not far-fetched from that of CGS-CIMB Research which has raised LC Titan’s target price to RM3.95 (from RM2.99 previously) due to an increase in its earnings forecasts for LCT.
“LC Titan’s 1Q FY2021 core net profit was the highest quarterly profit since it listed in 2017 and blew the roof off our modest forecasts,” justified analyst Raymond Yap in a company update dated April 29.
“(We also) reiterate ‘add’ as LC Titan’s upcoming 2Q FY2021F results will likely be extremely strong as well with spreads in April and May even fatter than in 1Q FY2021.”
Meanwhile, Maybank IB Research upgraded LC Titan’s rating to “hold” (from “sell” previously) with a higher target price of RM3.10 (from RM2.10 previously).
“1Q FY2021 results was exceptionally strong, largely due to the supply disruption caused by Winter Storm Uri,” opined analyst Lee Yen Ling.
“We think 2Q FY2021 earnings could be sequentially weaker (albeit still strong) as the Uri effect dissipates and earnings in 2H 2021 could be weaker as more supply from China/Malaysia comes on stream.”
At 4.40pm, LC Titan was down 22 sen or 6.51% to RM3.16 with 8.39 million shares traded, thus valuing the company at RM7.29 bil. – May 17, 2021
