HwangDBS Equity Research - 21 Feb 2012

Stock Name: NOTION
Company Name: NOTION VTEC BHD

Research House: HWANGDBS

Price Call: BUY

Target Price: 2.10

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD

Research House: HWANGDBS

Price Call: HOLD

Target Price: 1.05

Stock Name: MSM
Company Name: MSM MALAYSIA HOLDINGS BERHAD

Research House: HWANGDBS

Price Call: SELL

Target Price: 4.15

Notion VTec; Buy; RM2.02
Price Target: RM2.10; NVB MK
A temporary setback

1QFY12 turn in RM4.8m net loss; announces 3-for-4 bonus issue and 1-for-4 warrants (free). Expect recovery in FY12, driven by HDD segment. Maintain Buy with RM2.10 TP.

 
Evergreen Fibreboard; Hold; RM1.02
Price Target: RM1.05 (Prev: RM0.85); EVF MK
Earnings surprise

4Q11 earnings fell 21% q-o-q to RM20m, above expectations. Earnings were driven by higher MDF prices, but the impact was mitigated by higher raw material costs. Maintain Hold with a revised RM1.05 TP
pegged to 8x FY12F EPS.


MSM Malaysia Holdings; Fully Valued; RM5.00
Price Target: RM4.15 (Prev: RM3.80); MSM MK
Limited growth prospects

4Q11 net profit of RM76m was within our and consensus expectations. Raised FY12F-13F earnings by 5% each after accounting for higher sugar subsidy of 54 sen. Maintain Fully Valued with adjusted RM4.15 TP, pegged to 11x FY12F EPS.

Signs Point to Better Times

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD

Research House: OSK

Price Call: HOLD

Target Price: 1.05

Evergreen sees better 3QFY11 results on higher ASP

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD

Research House: RHB

Price Call: SELL

Target Price: 0.89

Evergreen Fibreboard Bhd
(Nov 21, 89.5 sen)
Maintain underperform at 87.5 sen with fair value of 89 sen: Evergreen's 9MFY11 net profit of RM42.4 million came in within expectations, accounting for 75% of our and 70% of consensus expectations. Despite the better results for 3QFY11, we believe this will not continue into 4QFY11 ending December as the increase in raw material costs (particularly rubberwood log costs) due to the rainy season in Thailand will likely have an impact on Evergreen's margins. Moreover, after the global stock market rout in August, the company has also stopped raising its product prices as its customers have generally turned cautious in their purchasing activities.

Year-on-year (y-o-y), 9MFY11 net profit declined by 52.5%, mainly due to: (i) drastic hike in glue and rubberwood log costs which were triggered by the prolonged rainy season as well as high latex prices; and (ii) impact from the weakening US dollar against the ringgit (7.4% y-o-y).

Quarter-on-quarter (q-o-q), 3QFY11 net profit was significantly higher at 92.1% mainly due to higher sales volume and higher average selling prices for the majority of Evergreen's products, which helped to alleviate the cost pressures on margins (due to drastic hike in glue and log cost) apart from improved operational efficiency and cost savings.

The risks include: (i) sharp drop in medium density fibreboard'' (MDF) price; (ii) sharp increase in log costs; (iii) further escalation of crude oil related glue and logistics costs; and (iv) strengthening of the ringgit which could reduce the company's export competitiveness.

We maintain our forecasts. We believe further headwinds ahead for the MDF industry, such as high raw material costs and capacity addition by players in the region, will continue to weigh on Evergreen's share price performance. We value Evergreen at 89 sen based on unchanged target price-earnings ratio of'' seven times FY12 earnings, which is in line with its five-year average historical price-earnings ratio. Maintain 'underperform'. ' RHB Research, Nov 21


This article appeared in The Edge Financial Daily, November 22, 2011.

Evergreen Fibreboard still weak despite better 2H

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD

Research House: OSK

Price Call: HOLD

Target Price: 0.85

Evergreen Fibreboard Bhd
(Nov 8, 91.5 sen)
Maintain'' neutral at 96.5 sen with revised fair value of 85 sen (from RM1.25): EFB experienced its worst quarter since 2010 in 1QFY11. The company continued to be hemmed in by flat selling prices and costlier raw materials. However, it managed to raise the selling prices of medium density fibreboard (MDF), which contributes more than 85% of revenue. The prices of 2.5mm thick MDF stood at US$270 (RM845) per cu m in January 2011 while 18mm MDF was at US$245. In July, EFB raised the price of 2.5mm thick MDF by 11.1% to US$300 per cu m while 18mm thick MDF was priced 12.2% higher at US$275. We believe the price increases, which were agreed to by EFB's customers, will contribute to a better 2HFY11 than 1H. However, the company decided to not continue raising its product prices in August to ensure that it remains competitive.

We are forecasting a better 2HFY11 in terms of net profit given the drop in raw material prices as well as higher selling prices. But we are lowering our full-year FY11 net profit forecast to take into account its poor 1HFY11 results, weaker customer demand and higher year-on-year prices of raw materials. We are cutting our net profit estimate by 16.1% to RM58.2 million from RM69.4 million previously although we anticipate a better 3QFY11 quarter-on-quarter. For FY12, our revenue forecast is nudged down by 1.6% to RM944.9 million from RM960.4 million, while the projected net profit is reduced by 19.1% from RM77 million to RM62.3 million.

EFB will need a catalyst to propel its earnings in FY11 and FY12. We feel that the company's earnings will still be weighed down by high raw material costs and stiff competition. Hence, we are valuing the stock at a lower seven times FY12 earnings per share (from nine times), from which we derive a fair value of 85 sen, which is in line with its five-year average historical price-earnings ratio. ' OSK Research, Nov 8


This article appeared in The Edge Financial Daily, November 9, 2011.

Evergreen Fibreboard raising ASP to mitigate cost pressures

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD

Research House: RHB

Price Call: SELL

Target Price: 1.16

Evergreen Fibreboard Bhd
(June 20, RM1.15)
Maintain underperform at RM1.14 with revised fair value of RM1.16 (from 92 sen): Evergreen's average rubberwood log costs escalated by 21% year-on-year in 2010 as a result of a reduction in supply, largely thanks to rising latex prices as well as the bad weather conditions in 2HCY10.

The high rubberwood log costs have persisted so far into 2011 with the current average cost (up to April) actually 24% higher than FY10's average. The management believes that current rubberwood log costs have more or less reached their peak, and feels they are more likely to trend down due to an expected increase in rubberwood log supply as a result of improving weather conditions.

Glue cost was quite stable throughout 2010, and only started to escalate towards the end of the year. In line with the higher crude oil prices in early 2011, average glue cost (up to April) has increased by 15% compared with 2010's average.

The average increase in glue cost for FY11 ending December will likely be lower, as crude oil prices have since April started to ease off from their highs to the current level of US$116 (RM353.80) per barrel.

To mitigate the cost pressure on margins, Evergreen has been raising the average selling price (ASP) of its medium density fibreboard'' (MDF) products by US$5 per cu m consecutively each month since January. The management said the planned hike in ASP is only halfway through and it will need to hike prices by another US$15 to US$20 per cu m to fully mitigate the increase in raw material costs. This is not expected to be an issue, as the management said its customers have been more receptive to the higher ASP because the increases have been gradual.

The management has assured that it will maintain its 30% dividend payout ratio, which translates to a net dividend payout of about four sen per share based on our FY11 earnings per share forecast of 13.5 sen and a net yield of 3.5%.

The risks include: (i) sharp drop in MDF price; (ii) sharp increase in log costs; (iii) escalation of crude oil-related glue and logistics costs; and (iv) further strengthening of the ringgit which could reduce the company's export competitiveness.

We raise our FY11 to FY13 earnings forecasts by between 3% and 7% after raising our ASP and rubberwood log cost assumptions.

We believe further headwinds ahead for the MDF industry, such as high raw material costs and the strengthening of the ringgit against the greenback will continue to weigh on Evergreen's share price performance.

Post earnings revision, and after rolling forward our valuation base year, we now value Evergreen at RM1.16 (from 92 sen previously) based on an unchanged target price-earnings ratio of seven times FY12 earnings, in line with its five-year average historical PER. We maintain 'underperform'. ' RHB Research, June 20


This article appeared in The Edge Financial Daily, June 21, 2011.

EVERGRN - HwangDBS downgrades Evergreen to 'neutral'

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: HWANGDBS

OSK Research has downgraded Evergreen Fibreboard (EVF) to "neutral" following profits that has dissapointed estimates
due to higher-than-expected rubber log prices and weakening US Dollar.

"Revenue came in line with our expectations, declining marginally by 2.2 per cent, on slightly weaker volume sales.

"However, with a drastic rise in rubber log prices and weakening US Dollar, bottom line profits came below our and consensus expectations, accounting for only 5.8 per cent and 6.7 per cent of our and consensus full year forecast," OSK Research said in a statement today.

Meanwhile, HwangDBS Vickers Research has also cut the group's earnings for fiscal year 2011 to 2013 between 19 per cent and 27 per cent on higher wood cost assumptions.

It said EVF's operations remained severely disrupted by floods in Johor and Thailand, coupled with slow orders during Chinese New Year holidays and major maintenance works on most of its plants.

"Fiscal year 2011 will be a challenging year for EVF given that demand is unlikely to be strong enough to offset the impact of a weaker US Dollar and raw material costs," it said.

It maintained its "hold" stance for EVF with a reduced target price of RM1.15, from RM1.55, previously. -- Bernama

EVERGRN - Evergreen falls on weaker earnings, downgrade

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: OSK

KUALA LUMPUR: Shares of EVERGREEN FIBREBOARD BHD [] fell in early trade on Tuesday, May 24 after its first quarter earnings slumped to RM5.75 million from RM33.08 million a year ago

At 9.01am, it was down five sen to RM1.17 with 192,500 shares done.

The FBM KLCI rose 2.21 points to 1,531.19. Turnover was 12.28 million shares valued at RM11.44 million. There were 53 gainers, 61 losers and 72 stocks unchanged.

OSK Research said while Evergreen's revenues were in-line with its estimates, profits disappointed both its and consensus estimates due to higher than expected rubber logs prices and weakening US dollar.

'This prompts us to lower our earnings estimates and we lower our FV for the stock to RM1.22 from RM1.70 previously. We downgrade Evergreen to a NEUTRAL from BUY previously,' it said.

EVERGRN - OSK Research keeps Buy call on Evergreen, lowers TP to RM1.73

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: OSK

KUALA LUMPUR: OSK Research said it recently received an update on Evergreen Fibreboard (EFB)'s business operations and found that a spate of increases in the prices of raw materials had chipped away the company's profits.

The research house said on Thursday, March 17 that Evergreen was also hit by a shortage of raw material and was unable to sell as much timber products, which in turn also affected its topline.

'These factors prompt us to lower our earnings estimates and arrive at a lower target price of RM1.73 from RM2.02 previously. The stock remains a BUY,' it said.

EVERGRN - HwangDBS maintains 'buy' call on Evergreen

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: HWANGDBS

HwangDBS Vickers Research is maintaining its "buy" recommendation on Evergreen Fibreboard Bhd with a target price of RM2 despite the company recording lower profits in the fourth-quarter of last year.

The research firm said the company was well positioned to benefit from the economic recovery, as it was the fifth largest medium-density fibreboard (MDF) producer in the world.

It expects MDF prices to rise, going forward, in line with expected stronger demand. "Looking ahead, we expect earnings to improve as glue price should normalise," it said in a research note today.

For the financial year ended Dec 31, 2010, Evergreen posted a higher pre-tax profit of RM115.151 million compared with RM80.752 million chalked up previously.

Revenue increased to RM951.186 million, for the period under review, from RM771.514 million previously.

Meanwhile, OSK Research raised Evergreen's revenue forecast on the back of higher sales and average selling prices.

The research firm said sales would be backed by both local and offshore demand, which would drive up the average utilisation rate to 85 per cent.

"We also see selling prices tick up by five per cent in financial year 2011 as management increases selling prices to pass on the higher cost to customers and to match market demand," it added. -- Bernama

EVERGRN - HDBSVR maintains Buy on Evergreen Fibreboard, TP RM2

Stock Name: EVERGRN
Company Name: EVERGREEN FIBREBOARD BHD
Research House: HWANGDBS

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR)said Evergreen Fibreboard's 4Q10 would likely be weak due to margin squeeze.

It said on Wednesday, Jan 19 it had reduced FY0F-12F earnings by 9%-15% but it expected better quarters ahead with higher MDF prices and normalised glue prices.

'Maintain Buy and RM2 TP. As the world's 5th largest producer, Evergreen Fibreboard is positioned to benefit from the global economic recovery, also among the cheapest MDF players at 6x FY11F EPS,' it said.