Posted by Lit Kok Wai > 2014-09-30 02:01 | Report Abuse

If the rise of SMP raw material price they are mentioning is in the range of 28%,this indicates that in Q2 2014, they are probably using the batch of raw materials with the average quarter price tag of USD 4,692 / tonne vs. USD 3,679 /tonne in Q2 2013.

But come to Q3 2014,average SMP price for the quarter had went down to USD 3,903 / tonne already...as compared to USD 4,479 / tonne used for Q3 2013.

But of course...it's impossible to pin point exactly on the timing on raw material prices...But if this is true, I do foresee a much greater reversal in earnings for DLADY in the next few quarters.

Q3 2014 should be a turning point starting with gross profit ceased to decline, or probably start to show some low single digit growth, Q4 2014 will back into double digit growth in earnings. Nevertheless, the above prediction is made by assuming the sales volume is able to maintain.

In Q1 2015 and subsequent quarters,DLADY might show a quantum leap in earnings due to improvement in margins, as based on my raw judgement, SMP raw materials roughly amount to 40-45% of the revenue or 50% of the total cost.

A decline of 25-30% in this item would slash away 10-12% of the cost of sales, which is equivalent to addition of 10-12% into pre-tax profit.

For a company with PBT margin of 19% and PAT margin of 14%, additional 10-12% of profit margin would translate into a quantum surge in earnings. It may not be a surprise if FY2015 DLADY earnings surpass EPS of RM3.00.

P/S: kiasutrader, it's a pleasure to meet you here again. We met before and sat on the same table for lunch before in Uncle KYY event in YMCA Ipoh on 16 Feb 2014. Hope to get more insights and sharing from you regarding the analysis on DLADY. Thanks.

Posted by Lit Kok Wai > 2014-09-30 10:08 | Report Abuse

Any feedback from the finance director regarding the poor operating cash flow for 1H 2014?