Evergreen 0.91 on 10-4-2017-- 5101 kl

#EVER GREEN BY#DAMARU

In the meantime, CIMB Research said Evergreen has recently completed a placement of 10 per cent of new share capital with 51.3 million new shares were placed at RM2.05 per share to raise RM105 million in proceeds.

Evergreen to benefit from multiple tailwinds

 December 30, 2015, Wednesday

quotes
“Our group’s long-term direction is to diversify away from principally relying on sales of raw MDF boards by going downstream via value-adding and product differentiation. As our furniture offerings are made of panel boards, the completion of the particleboard plant will complement our efforts to expand our downstream ambitions as one of the major raw materials for our furniture products is particleboard,” he said. 

Evergreen’s in-house production of intermediate products including the glue, MDF boards and particleboards gives rise to Evergreen’s position of being a true integrated producer from raw boards to boards with overlay and RTA furniture sets. 

The projects, when completed, will strengthen Evergreen’s core competencies as well as complement and generate new but related income streams. 

Leong said most of the investment costs for the expansion projects had already been accounted for in FY15 and FY16. 

“We expect a capex budget of no more than RM50mil for FY17. We think there could be a slight improvement in our financial results this year compared with the previous year, as our expansion projects will start to kick-in in the second half of the year,” he said.

Analysts believe that Evergreen’s business is an exciting turnaround story with many tailwinds in its favour. These tailwinds include the company’s strong earnings which would be driven by strong US dollar, lower low material costs, falling freight costs and benefitting from its internal restructuring.

KUCHING: Evergreen Fibreboard Bhd (Evergreen) is poised to be a beneficiary of multiple tailwinds ahead.

The research arm of CIMB Investment Bank Bhd (CIMB Research) in a recent report said Evergreen’s business is an exciting turnaround story with many tailwinds in its favour.

The research firm noted those tailwinds include the company’s strong earnings which would be driven by strong US dollar, lower low material costs, falling freight costs and benefitting from its internal restructuring.

CIMB Research observed that Evergreen is shutting down unprofitable plants, buying new equipment to reduce processing time and expanding its particleboard and furniture capacity.

The research firm added Evergreen is one of Asia’s largest medium-density fibreboard (MDF) manufacturer with capacity of 1.3 million cubic meter per annum spreading across three countries namely Malaysia, Thailand and Indonesia.

CIMB Research gathered that the company has over 600 customers in more than 40 countries worldwide.

It noted about 70 per cent of Evergreen’s revenues were denominated in US dollar while its sensitivity analysis indicated that a one per cent strengthening of the greenback increases Evergreen’s earnings per share by 10 per cent.

On another note, the research firm believed shareholders could be rewarded with a special dividend next year if the sale of the company’s rubber plantation and other non-core assets being old MDF plant in Segamat, Johor and land materialise.

In the meantime, CIMB Research said Evergreen has recently completed a placement of 10 per cent of new share capital with 51.3 million new shares were placed at RM2.05 per share to raise RM105 million in proceeds.

The research firm noted the company is expected to use the proceeds from the placement to reduce its short-term debt and to fund capital expenditure for its new particleboard or furniture line.

Nonetheless, CIMB Research is neutral on Evergreen’s move to use the funds raised from the placement to reduce debt and acquire new particleboard line as it will dilute the company’s earnings by approximately 10 per cent.

Despite that, the research firm forecasted Evergreen’s balance sheet will be strengthened with better net cash position which, in turn will allow the company to continue to declare dividend in line with the company’s dividend policy in 2016.

Additionally, CIMB Research also observed that in November 2015, Evergreen announced a two shares for one bonus shares that will enlarge the company’s shares capital base from 564 million shares (post placement) to 846 million shares.

The research firm viewed the bonus issue exercise by the company as positive as the move will improve Evergreen’s stock trading liquidity, which could further provide re-rating to the stock’s valuation multiples.

CIMB Research opined that potential re-rating catalysts of the company’s stock were continued weakness of the ringgit and the upcoming bonus shares issue by the company.

The research firm has assigned an ‘add’ rating to Evergreen, valuing the company’s share price with a fair value of RM3.08 per share based on 12.5 times price earnings (PE) pegged to forecast financial year 2017 (FY17) earnings per share (EPS).