There was an article in the Star, where Yeoh Keat Seng recommended a BUY on Evergreen (here). According to him, the "MDF sector is turning around after suffering from over-capacity over the last five years, the consequence of massive capacity build-up following the Chinese government’s unprecedented 4 trillion yuan stimulus in 2008".
The sector-wide recovery is also reflected in the financials
of 2 Asian MDF giants, "Vanachai of Thailand and Dongwha Enterprise of Korea, who had
both have turned profitable since 1Q14. Their share prices have skyrocketed by
5x to 6x from their December 2013 low, while their FY15 valuations have rerated
sharply to ~16x PE and 9x – 12 EV/EBITDA."
"As for Evergreen, it managed to turn around in 3Q14 onwards after
seven consecutive quarters of red ink. We estimate that the company is
currently trading on FY15 PE of only 8x".
Based on Yeoh Keat Seng's numbers, Evergrn could potentially double in value if its valuation matches those of its peers, like Vanachai of Thailand and Dongwha Enterprise of Korea.
Based on Yeoh Keat Seng's numbers, Evergrn could potentially double in value if its valuation matches those of its peers, like Vanachai of Thailand and Dongwha Enterprise of Korea.
Technical Outlook
Today, Evergrn broke above the recent high of RM1.28 (see Chart 1). This, coupled with the breakout above the long-term downtrend line at RM1.25 (see Chart 2), may that Evergrn's uptrend is likely to continue. Its next resistance levels are RM1.60, RM1.80 & RM2.00.
Chart 1: Evergrn's daily chart as at Jun 8, 2015 (Source: ShareInvestor.com)
Chart 2: Evergrn's monthly chart as at Jun 8, 2015 (Source: ShareInvestor.com)
Recent Financial Results
As mentioned earlier, Evergrn's bottom-line has returned to the black in 3Q14. In the past 3 quarters, we can see that net profit has risen steadily from RM10 million in 3Q14 to RM20 million in 1Q15.
Table: Evergrn's last 8 quarters' financial performance
Chart 3: Evergrn's last 41 quarters' financial performance
Conclusion
Based on satisfactory financial performance, attractive valuation & bullish technical outlook, Evergrn is a good stock for long-term investment.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Evergrn.
Hi Alex,
ReplyDeleteMay i have your view on Waseong?
Thank you
Hi Lai,
ReplyDeleteWaseong has tested its gradual uptrend line that stretches back to 2002. The support from that line is at RM1.20.
Waseong's topline A& bottomline dipped in the last 3 quarters, along with the rest of the O&G sectoral performance.
Its financial position is a bit weak as at Mar 31, 2015, with current ratio at 0.95X and gearing ratio at 1.3X.
Its valuation is fairly reasonable -even, attractive- with PE at 8.2X. Dividend yield is quite respectable at 8.6%.
Based on mildly positive technical outlook & attractive valuation, Waseong could be a good stock for long-term investment.