Hevea: Earning Dropped Due to Scheduled Maintenance

Results Update

For QE30/9/2017, Hevea's net profit dropped 56% q-o-q or 58% y-o-y to RM7 million while revenue dropped 13% q-o-q or 7% y-o-y to RM118 million. PBT dropped 55% q-o-q or 58% y-o-y to RM8 million due mainly to the planned annual preventive maintenance at the particleboard sector, shortage of foreign workers faced by RTA sector and a lower USD exchange rate during the reporting quarter. In the comment on its future prospect, it noted that the problem of shortage of foreign workers is likely to persist and the company will increase automation & move to higher value products to overcome this challenge.

Table: Hevea's last 8 quarterly results


Graph 1: Hevea's last 40 quarterly results


Graph 2: Hevea's last 10 years' financial position

Valuation

Hevea (closed at RM1.28 last Thursday) is now trading at a PE of 8.5 times (based on last 4 quarters' EPS of 15.14 sen. At this PER, Hevea is still deemed fairly valued. In addition, Hevea pays a decent dividend, with yield of 4.1%.

Technical Outlook

Hevea has broken below its long-term uptrend line at RM1.48-1.50. It may continue to slide to its next support at the horizontal line at RM1.25.


 Chart: Hevea's weekly chart as at Dec 4, 2017  (Source: Malaysiastock.biz)

Conclusion

Despite the weaker financial performance & the negative technical outlook, Hevea is deemed to be a good stock for long-term investment based on its strong financial position and relatively attractive valuation. I rate the stock a HOLD as the stock may find support at the immediate support at RM1.25.

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.