Evergreen is involved in the manufacture of medium density fibreboard, knock-down furniture and doors.
Recent Financial Results
Evergreen's turnover for QE30/6/06 increased by 4.8% q-o-q or 19.4% y-o-y to RM129.6 mil. Pre-tax profit has jumped 42.2% q-o-q or 28.1% y-o-y to RM16.1 mil. Net profit has increased 29.9% q-o-q to RM14.1 mil but declined by 12.6% when compared to the same quarter last year. The latter decline was due to RM5.4 mil of prior years' over-provision of taxation reversed in QE30/6/05.
Valuation
Based on the EPS of 2.94 sen for QE30/6/06, Evergreen's full year EPS could be 11.8 sen. At yesterday's closing price of RM0.90, Evergreen is now trading at a PE of 7.6 times. While this may not look cheap, I expect Evergreen's performance to improve going forward. Its recent performance has been affected by stiff competition as a result of overexpansion in the industry & high operating cost (such as the cost of glue caused by high crude oil prices and sharp hike of the cost of rubber-wood).
Technical Outlook
Evergreen has just broken above its medium-term downtrend line at the RM0.90 level. With this, Evergreen's downside is limited. We will however have to wait for the uptrend to be established. See the chart below.
Chart: Evergreen's weekly chart as at Oct 4
Conclusion
Based on improving outlook, both on the technical & fundamental fronts, I believe that Evergreen will be a good long-term investment.
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