Why The Divergence?

Malaysian-listed egg producer, Teo Seng Capital Berhad appears to lag behind its peer, LTKM Berhad. For year till date (as of end April 17), LTKM has achieved till-date performance return of approximately 32% (due to its recent spike) whilst Teo Seng Capital has only achieved performance return of approximately 4.9%.

Performance Till Date: Comparison 

Performance Comparison

Fundamentals – Comparison

  • Teo Seng has a higher relative ROE, thereby justifying a higher Price-to-Book / Price-to-NAV if compared to LTKM
  • Teo Seng has a higher beta (more volatility) due to higher leverage in its capital structure
  • If not because of LTKM’s recent big spike, LTKM’s P/E would have been relatively lower than Teo Seng’s P/E
  • Liquidity ratios are more favourable for LTKM
  • No material difference in profitability margins between the two companies

Comparison.png

So, what causes the divergence?

Since there is no material difference in fundamentals between the two companies, the divergence in performance can not be clearly attributable to the differences in fundamentals. In terms of business model, LTKM is trying to develop a separate independent property division in addition to its existing poultry business.

What is clear at this juncture – there is no recent development or announcement that causes the recent spike in LTKM’s share price:

interactive_chart_eccbc87e4b5ce2fe28308fd9f2a7baf3.png

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

 

 

Author: Ken Utau

Markets Observer + Food Lover

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