logo
Impressive Earnings May Not Tell The Whole Story For LFE Corporation Berhad (KLSE:LFECORP)

Impressive Earnings May Not Tell The Whole Story For LFE Corporation Berhad (KLSE:LFECORP)

Yahoo08-03-2025

Despite posting some strong earnings, the market for LFE Corporation Berhad's (KLSE:LFECORP) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.
See our latest analysis for LFE Corporation Berhad
One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. This ratio tells us how much of a company's profit is not backed by free cashflow.
That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.
For the year to December 2024, LFE Corporation Berhad had an accrual ratio of 0.28. We can therefore deduce that its free cash flow fell well short of covering its statutory profit, suggesting we might want to think twice before putting a lot of weight on the latter. Indeed, in the last twelve months it reported free cash flow of RM4.2m, which is significantly less than its profit of RM25.4m. LFE Corporation Berhad's free cash flow actually declined over the last year, but it may bounce back next year, since free cash flow is often more volatile than accounting profits. However, as we will discuss below, we can see that the company's accrual ratio has been impacted by its tax situation. This would certainly have contributed to the weak cash conversion.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of LFE Corporation Berhad.
Moving on from the accrual ratio, we note that LFE Corporation Berhad profited from a tax benefit which contributed RM6.6m to profit. It's always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. We're sure the company was pleased with its tax benefit. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth. So while we think it's great to receive a tax benefit, it does tend to imply an increased risk that the statutory profit overstates the sustainable earnings power of the business.
This year, LFE Corporation Berhad couldn't match its profit with cashflow. On top of that, the unsustainable nature of tax benefits mean that there's a chance profit may be lower next year, certainly in the absence of strong growth. Considering all this we'd argue LFE Corporation Berhad's profits probably give an overly generous impression of its sustainable level of profitability. If you want to do dive deeper into LFE Corporation Berhad, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for LFE Corporation Berhad (1 is significant) you should be familiar with.
Our examination of LFE Corporation Berhad has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

LPI Capital Bhd (KLSE:LPI) shareholders have earned a 26% return over the last year
LPI Capital Bhd (KLSE:LPI) shareholders have earned a 26% return over the last year

Yahoo

timean hour ago

  • Yahoo

LPI Capital Bhd (KLSE:LPI) shareholders have earned a 26% return over the last year

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the LPI Capital Bhd (KLSE:LPI) share price is 18% higher than it was a year ago, much better than the market decline of around 10% (not including dividends) in the same period. That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 7.9% higher than it was three years ago. With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement. LPI Capital Bhd was able to grow EPS by 9.6% in the last twelve months. The share price gain of 18% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago. You can see how EPS has changed over time in the image below (click on the chart to see the exact values). It might be well worthwhile taking a look at our free report on LPI Capital Bhd's earnings, revenue and cash flow. It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of LPI Capital Bhd, it has a TSR of 26% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return. We're pleased to report that LPI Capital Bhd shareholders have received a total shareholder return of 26% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand LPI Capital Bhd better, we need to consider many other factors. For instance, we've identified 2 warning signs for LPI Capital Bhd (1 is a bit concerning) that you should be aware of. We will like LPI Capital Bhd better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Institutions own 29% of Kossan Rubber Industries Bhd (KLSE:KOSSAN) shares but private companies control 36% of the company
Institutions own 29% of Kossan Rubber Industries Bhd (KLSE:KOSSAN) shares but private companies control 36% of the company

Yahoo

time18 hours ago

  • Yahoo

Institutions own 29% of Kossan Rubber Industries Bhd (KLSE:KOSSAN) shares but private companies control 36% of the company

The considerable ownership by private companies in Kossan Rubber Industries Bhd indicates that they collectively have a greater say in management and business strategy 53% of the business is held by the top 5 shareholders Insiders own 14% of Kossan Rubber Industries Bhd Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Every investor in Kossan Rubber Industries Bhd (KLSE:KOSSAN) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 36% ownership. Put another way, the group faces the maximum upside potential (or downside risk). Meanwhile, institutions make up 29% of the company's shareholders. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Let's take a closer look to see what the different types of shareholders can tell us about Kossan Rubber Industries Bhd. See our latest analysis for Kossan Rubber Industries Bhd Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing. As you can see, institutional investors have a fair amount of stake in Kossan Rubber Industries Bhd. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Kossan Rubber Industries Bhd's historic earnings and revenue below, but keep in mind there's always more to the story. Kossan Rubber Industries Bhd is not owned by hedge funds. Our data shows that Kossan Holdings (M) Sdn Bhd is the largest shareholder with 35% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.7% and 5.6%, of the shares outstanding, respectively. Additionally, the company's CEO Kuang Sia Lim directly holds 2.8% of the total shares outstanding. Our research also brought to light the fact that roughly 53% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business. While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily. While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves. Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances. It seems insiders own a significant proportion of Kossan Rubber Industries Bhd. It is very interesting to see that insiders have a meaningful RM608m stake in this RM4.3b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling. The general public, who are usually individual investors, hold a 21% stake in Kossan Rubber Industries Bhd. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies. We can see that Private Companies own 36%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company. It's always worth thinking about the different groups who own shares in a company. But to understand Kossan Rubber Industries Bhd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Kossan Rubber Industries Bhd , and understanding them should be part of your investment process. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future. NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio

Returns On Capital Signal Tricky Times Ahead For L&P Global Berhad (KLSE:L&PBHD)
Returns On Capital Signal Tricky Times Ahead For L&P Global Berhad (KLSE:L&PBHD)

Yahoo

time21 hours ago

  • Yahoo

Returns On Capital Signal Tricky Times Ahead For L&P Global Berhad (KLSE:L&PBHD)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at L&P Global Berhad (KLSE:L&PBHD) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for L&P Global Berhad, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.088 = RM12m ÷ (RM142m - RM9.2m) (Based on the trailing twelve months to March 2025). Therefore, L&P Global Berhad has an ROCE of 8.8%. On its own, that's a low figure but it's around the 7.3% average generated by the Packaging industry. See our latest analysis for L&P Global Berhad Historical performance is a great place to start when researching a stock so above you can see the gauge for L&P Global Berhad's ROCE against it's prior returns. If you'd like to look at how L&P Global Berhad has performed in the past in other metrics, you can view this free graph of L&P Global Berhad's past earnings, revenue and cash flow. When we looked at the ROCE trend at L&P Global Berhad, we didn't gain much confidence. To be more specific, ROCE has fallen from 26% over the last five years. And considering revenue has dropped while employing more capital, we'd be cautious. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased. On a related note, L&P Global Berhad has decreased its current liabilities to 6.5% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money. We're a bit apprehensive about L&P Global Berhad because despite more capital being deployed in the business, returns on that capital and sales have both fallen. Long term shareholders who've owned the stock over the last year have experienced a 68% depreciation in their investment, so it appears the market might not like these trends either. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere. Like most companies, L&P Global Berhad does come with some risks, and we've found 3 warning signs that you should be aware of. While L&P Global Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store