Evergreen's net profit dropped in QE31/12/2007

Evergreen has just announced its results 4Q2007 ended 31/12/2007. For QE31/12/2007, Evergreen's net profit increased by 52.4% y-o-y from RM17.3 million to RM26.4 million on the back of a 24.0%-increase in turnover from RM137 million to RM170 million. However, when compared with the immediate preceding quarter, the net profit has dropped by 25.8% on the back of 16.1%-decline in turnover. The lower net profit was attributable to the increase in log prices as well as hike in glue prices and freight charges. No reason was given for the decline in turnover. It is possible that the drop in turnover is attributable to a fire in its Johor plant in mid-September that had partially damaged some production facilities.

For FY2007, Evergreen's net profit increased by 98.2% from RM59.8 million to RM118.5 million, while its turnover has increased by 38.5% from RM528 million to RM732 million.



Evergreen (closed at RM1.32 as at Feb 27) is now trading at a trailing PE of 5.3 times (using the last 4 quarters' EPS of 24.7 sen) or a Price to Book of 1.2 times (using the NTA per share of RM1.12 as at 31/12/2007).

Evergreen broke its uptrend line support at RM1.35 level a few days ago. It is now hanging onto its immediate horizontal support at RM1.32. The next horizontal support is at RM1.15.


Chart 1: Evergreen's weekly chart as at February 27, 2008 (courtesy of Quickcharts)


Chart 2: Evergreen's daily chart as at February 27, 2008 (courtesy of Quickcharts)

Based on the poorer financial performance (albeit in one quarter only) & a likely breakdown of its uptrend line, the earlier BUY recommendation for Evergreen should be put on hold. Let's watch & see whether the share price can recover above the uptrend line. An improvement in its financial performance in 1Q2008 would be another thing to watch out for.