2015年3月26日星期四

Tuesday, 29 April 2014

LCTH - Revamping Profit

The market had took a rather drastic turn from the DJIA after challenging above 16500 to mark a new leg of bullishness, however, just to witness a tired fighting bull collapsing from the level as DJIA tumbled lower. The tension at 16500 is very high, and can the bull charge forward to test it again? Or it is starting of a bear party now? At the time right now, DJIA is sitting on a +43 points at 16404 currently.

The local market had seen heavy profit taking sessions, especially from the property counters that had rallied quite a lot where some of the counters appreciated more than 100% from their starting point. While the market turn to a cautious outlook, I would like to highlight LCTH which had caught my attention. What can be so attractive in LCTH Corporation Berhad?

Let's have a look at LCTH recent price chart

LCTH had seen active trading recently where the share price had appreciated almost more than 20% from RM 0.22. Which the price look set to be consolidating around the range of RM 0.25, LCTH is looking set to break forward into the 30 cents region once the consolidation is done. LCTH will be position to see some interesting volume, possibly more than 5m a day as it prepares to break forward.


What could be so interesting in LCTH ?
LCTH is involved in plastic precision technology, supplying engineering parts and components that are vital  in telecommunication, consumer electrics and electrically supply industry.

LCTH had been laying in their blues for the past couples of years after their business had seen slow down from the market after a series of changes made in procurement by their major customer. The changes had forced LCTH to do restructure their business, in which LCTH fully owned subsidiary - Classic Advantage Sdn Bhd, had entered into a sales & purchase agreement to dispose of its asset to Flextronic Technology(Penang) Sdn Bhd that is worth around RM17.31 millions.


Currently, LCTH sitting on a cash pile of around RM90m (after deducting debts notes)

With approximately RM90m spread over 360m shares issued, the cash value of each share is currently standing at RM 0.25 per share, which is a fairly high amount of cash reserve. The company still had another business arm under Fu Hao Manufacturing (M) Sdn Bhd which is generating profits.

LCTH had underwent a major restructuring exercise and come towards the conclusion to dispose off Classic Advantage Sdn Bhd after the changes in procurement method by the customer which had saw their factory running on over capacity, which will be a long term business losing subsidiary if LCTH had not disposed off the unit. The disposal will see LCTH focusing on Fu Hao Mannufacturing (M) Sdn Bhd which is currently situated at Penang.

LCTH started to look out for better business opportunities now after started to realign their business focus towards the robust industry of Automotive, Medical and Solar Power industry as they start to kick off 2014 into the glorious moment once again. LCTH will target to secure contracts that will worth of at least RM300m in revenue for 2014.

In my opinion, LCTH will be in a very solid good position with their strong cash position at the moment. As the management team look set to realign their business structure, LCTH will be focusing on their profitable arm and look set to turn around the financial in FYE 2014. Based on the current cash value of RM 0.25 per share and their still on going business in Penang, LCTH is a deeply undervalued company whereby the current market price is just reflecting of a cash value of the shares itself (NTA RM 0.48). A short term outlook will see LCTH breaching RM 0.30, while a longer term outlook will see LCTH trading at around RM 0.40.

Bone's short term TP: RM 0.325

Cheers and regards,
Bone