Business Description:
LTKM Berhad. The Group's principal activity is operating poultry farm for the production and sale of chicken eggs, chickens and organic fertilizers. Other activities include mining and trading of sand, as well as investment activities in quoted and unquoted securities held by the Group on a long term basis and provision of management services. Operations are carried out principally within Malaysia.
Wright Quality Rating: LBD8 Rating Explanations   |
http://spreadsheets.google.com/pub?key=ta9iC4u-l3laEWMXfyC27aA&output=html
The poultry business is profitable. However, its earnings swing from very good years to very trying years. Over the long term, there has not been a sustainable consistent growth in earnings.
The dividends have been consistent. Due to the low PE of the stock, this translates into a high dividend yield. Often, companies with little growth potential, the dividend yields may be on the high side.
Has management grown earnings with its retained earnings on a consistent and sustainable basis? Probably not.
Recently, the earnings have been improving and the company is generating large FCF. Though the dividends may increase, it is unlikely to be substantial. The company has committed a large portion of its internally generated FCF to starting a new business in the manufacturing of glass.
For the investor, would he/she prefers a larger dividend or would he/she prefers the cash be channeled to venture into another business? Perhaps, this question is muted, as the minority shareholders are unlikely to be able to influence the direction of this company meaningfully.
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