LB Aluminium - undervalued

One of the manufacturers of aluminium extrusion in Malaysia plans to capitalize on the boom of high end properties in Malaysia. Its products include aluminium fittings for various types of doors and windows.

Its main competitor in the high end property segment is Press Metal Bhd. The latter is involved in both aluminium smelting and manufacturing operations while LB is a pure downstream player.

LB commands a market share of 25% to 30% in the domestic extrusion business. Its net asset per share stood at rm0.97.

In the aluminium extrusion business, LB’s small peers include Tong Herr Res and PA Res. Tong Herr Res’s earnings have fluctuated between rm8.41 million and rm36.55 million in its past four financial years while PA Res has suffered losses every year since FY2008.

By comparison LB’s net profit had grown from rm7.74 million in FY2009 to rm\16.7 million in FY2013.

Its shares may seem undervalued (20 Fen 2014) as they are currently trading at around six times historical earnings while for Press Metal and Tong Herr is trading at 11.7 times and 13.71 times respectively.
LB seems to be on track to outperform its FY2013 results, having reported a cumulative net profit of rm11.02 million in 1HFY2014 ended Oct 31 2014.