Wednesday, September 02, 2015

Hevea: Top-line and bottom-line continued to grow

Results Update

For QE30/6/2015, Hevea's net profit increased by 15% q-o-q or 89% y-o-y to RM16 million while revenue was mixed- down 4% q-o-q or up 4% y-o-y to RM111 million. Revenue increased y-o-y due to increase was mainly from the particleboard sector achieving higher volume and higher average selling price from sales of higher grade, value added products and strengthening of USD during this reporting period.

Net profit increased y-o-y due mainly to better performance in the particleboard sector resulting from higher sale and sale of higher value and value added products despite being impacted by unrealised exchange loss of RM3.68 million due to the translation of the USD denominated term loan.


Table: Hevea's last 8 quarterly results


Chart 1: Hevea's last 31 quarterly results

Valuation

Hevea (closed at RM0.94 yesterday) is now trading at a PE of 8.5 times (based on last 4 quarters' EPS of 11 sen. At this PER, Hevea is deemed very attractive.

(Note: Hevea had a 1-to-4 1-to-5 share split in July 2015. Its EPS & PER are adjusted for this share split.)

Technical Outlook

Hevea has been on an uptrend since it broke above its long-term downtrend line, RR at RM0.23 in November 2013. The 21-month SMA line may serve as its uptrend line, with support at RM0.80. Upside may be capped at its recent high at RM1.10.


Chart 2: Hevea's weekly chart as at Sep 1, 2015  (Source: ShareInvestor)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook, Hevea remains 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, Hevea.
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9 comments:

  1. UnknownWednesday, September 02, 2015 8:31:00 AM

    1 split to 4. not 5

    ReplyDelete
  2. Alex LuWednesday, September 02, 2015 8:52:00 AM

    Hi Terry Tee,

    Thank you for tip. My computation & numbers are correct. It was my notation in the article that was incorrect.

    ReplyDelete
  3. laiWednesday, September 02, 2015 5:45:00 PM

    Hi Alex,

    when comparing PE per se, what criteria do you defined or compared as attractiveness?

    Thanks

    ReplyDelete
  4. Alex LuThursday, September 03, 2015 11:12:00 AM

    Hi lai,

    Comparison of PER between stocks is not easy. One must take into consideration the nature of the business (cyclical or stable); industry outlook (growing or stagnant; a few players or many players); position of the company via-a-vis the other players, etc. There is the risk of subjectivity to assert itself, which will affect our judgement.

    In the case of Hevea, it is one of the leading player in the particle board manufacturing industry. The other will be Evergreen. Hevea is a successful company, with strong growth in top-line and bottom-line. Its earnings growth is 34% in the past 8 quarters. It was higher in the preceding 8 quarters. To take into account its strong growth, you should compute PEG ratio, which is arrived at by dividing PER by earning growth. For Hevea, the PEG ratio is a very attractive 0.3 time. I should have noted that in the post.

    I feel that Hevea should trade at PER of at least 15 times; maybe 20 times. For it to double up is quite possible.

    ReplyDelete
  5. laiThursday, September 03, 2015 3:21:00 PM

    Hi Alex,

    in View of that, what or when do you think it is overvalued or when it is trading at its earnings peak?

    thanks

    ReplyDelete
  6. laiThursday, September 03, 2015 3:23:00 PM

    This comment has been removed by the author.

    ReplyDelete
  7. Alex LuFriday, September 04, 2015 10:25:00 AM

    Hi lai,

    The fair PER for a stock varies. For an average company, it could be 10-15 times. What will lower it would be the size of the company (small cap or large cap), free float or liquidity of the shareholding, management capability (compared QL & Harvest), historical performance, growth prospect, financial position, industry etc.

    If the stock is viewed positively, you don't mind paying PER of 25 times. On the other hand, some stocks should not be in the portfolio if when they are trading at 5-time PER.

    ReplyDelete
  8. laiFriday, September 04, 2015 10:59:00 AM

    eg and ea tech are trading at such low PE. taken all Iinto considerations, it is still attractive?

    thanks

    ReplyDelete
  9. Alex LuTuesday, September 08, 2015 2:36:00 PM

    Hi lai,

    EG's current PER is less than 3 times. That's cheap. Chartwise, it may have broken its uptrend line that dates back to September 2014. It needs to climb back above that uptrend line (say at RM0.68 or higher) to regain the upward thrust.

    EATECH broke its uptrend line that dates back to January this year. Like EG, EATECH needs to climb back above that uptrend line (say at RM1.00 or higher) to continue with its prior uptrend. Its current PER is very attractive at 2 times only.

    ReplyDelete