Evergrn: Awaiting Earnings Recovery

Results Update

In QE30/9/201, Evergrn's net profit rose 144% q-o-q but dropped 11% y-o-y to RM15.1 million while revenue rose 0.4% q-o-q or 7% y-o-y to RM260 million. Its  revenue increased q-o-q mainly due to commercial run of new Particle Board Plant in Segamat. Its profit before tax increased q-o-q mainly due to production efficiency and effective cost measures of new Particle Board Plant in Segamat.


Table: Evergrn's last 8 quarters' financial performance


Graph: Evergrn's last 51 quarters' financial performance

Financial Position

As at 30/9/2017, Evergrn's financial position is deemed satisfactory with current ratio at 2.05 times and gearing ratio at 0.34 time.

Valuation

Evergrn (closed at RM0.69 last Friday) is now trading at a trailing PER of 12 times (based on last 4 quarters' EPS of 5.87 sen. At this PER, Evergrn is still deemed fairly valued.

Technical Outlook

Evergrn has been in a slow decline after it peaked at RM1.68 in January 2016. The decline takes the form of a downward channel, with the lower line at RM0.65 providing support. 



Chart: Evergrn's weekly chart as at Jan 5, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & position and reasonable valuation, Evergrn is a good stock for long-term investment. However, its share price recovery will only begin once earnings begin to improve noticeably.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.