Hevea: Trading at Attractive Valuation

Results Update

For QE31/12/2017, Hevea's pre-tax profit rose 27% q-o-q but dropped 66% y-o-y to RM10 million while revenue rose 12% q-o-q but dropped 9% y-o-y to RM133 million. PBT rose q-o-q due mainly to the better performance at the particleboard sector as the planned annual preventive maintenance was done in the previous quarter. Profit after tax rose sharply due to a tax credit as the company recognized RM4.34 million of deferred tax assets arising principally from unabsorbed allowances on investment tax allowances available to the company less temporary differences in respect of excess of capital allowance over book depreciation.
(Note: Hevea's latest quarterly result was announced on 27 February.)

Table: Hevea's last 8 quarterly results


Graph: Hevea's last 41 quarterly results

Financial Position

Hevea's financial position is deemed healthy with current ratio at 3.7 times and total liabilities to total equity of 0.2 times.

Valuation

Hevea (closed at RM0.93 yesterday) is now trading at a PE of 7.8 times (based on last 4 quarters' EPS of 12.03 sen). At this PER, Hevea is still deemed fairly valued. In addition, Hevea pays a decent dividend, with yield of 5.2%.

Technical Outlook

Hevea could be resting on its long-term uptrend line, SS at RM0.90.


 Chart: Hevea's weekly chart as at Mar 20, 2018_12.30pm  (Source: Malaysiastock.biz)

Conclusion

Based on improving financial performance, healthy financial position and mildly positive technical outlook, Hevea is deemed to be a good stock for long-term investment.

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.

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.

Hevea: Earning Remained Healthy

Results Update

For QE31/3/2017, Hevea's net profit was mixed - down 10% q-o-q or up 25% y-o-y - to RM25 million while revenue rose 9% q-o-q and % y-o-y to RM1519million. Profits rose y-o-y due mainly to better performance in both the particleboard (due mainly to better margin brought on by higher selling price, increased sales of higher grade products, increased sales in value added products and higher USD exchange rate to Ringgit during this reporting period) and RTA sectors (due mainly to benefits derived from the more efficient production processes, higher revenue, and higher USD exchange rate to Ringgit.) [The result for QE31/3/2017 was announced on May 23.]


Table: Hevea's last 8 quarterly results


Graph: Hevea's last 38 quarterly results

Valuation

Hevea (closed at RM1.37 last friday) is now trading at a PE of 7.6 times (based on last 4 quarters' EPS of 17.8 sen. At this PER, Hevea is still deemed very attractive. In addition, Hevea pays a decent dividend, with yield of 3.4%.

Technical Outlook

Hevea is in a steep uptrend line, SS with support at RM1.35 (see Chart 1). the immediate support is at the line connecting the recent trough at RM1.25-1.30 (see Chart 2).


Chart 1: Hevea's monthly chart as at Jun 2, 2017  (Source: ShareInvestor)


 Chart 2: Hevea's weekly chart as at Jun 2, 2017  (Source: ShareInvestor)

Conclusion

Based on good financial performance, relatively attractive valuation & positive technical outlook, Hevea remains a good stock for long-term investment.

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.

Hevea: Fantastic result!

Results Update

For QE31/12/2015, Hevea's net profit increased by 42% q-o-q or 188% y-o-y to RM26 million while revenue grew by 22% q-o-q or 31% y-o-y to RM151 million.

Revenue increased y-o-y contributed by  both  the  particleboard sector (due to higher  sales  of  higher grade products, increased sales in value added products and higher USD exchange rate to Ringgit during this reporting period) and RTA sector (due to process automation which resulted in higher productivity, efficiency and also the capability to produce higher value and wider range of products).

PBT increased y-o-y due mainly to better performance in the particleboard sector resulting from increased sale of higher value and value-added  products coupled with the strengthening of USD, and also achieving an unrealized exchange gain of RM 950,000 instead of  a  loss  of  RM3.3  million  for  the same quarter in FY2014.


Table: Hevea's last 8 quarterly results


Chart 1: Hevea's last 33 quarterly results

Corporate News

In January, Hevea share price tumbled sharply when there was a spate of allegations amde against the company. This includes non-payment of dividend by its substantial shareholder, quality problem of its products in South Korea & funny accounting of amount owing by related parties. All of these were addressed by the management (here). Except for the last item, I do not see these problems as serious red flags. Ingenious accounting treatment is always a no-no for investors and the last item may serve as a nagging issue for sometimes, notwithstanding the fact that the amount owing had been fully settled.
 
Valuation

Hevea (closed at RM1.40 yesterday) is now trading at a PE of 7.6 times (based on last 4 quarters' EPS of 18.4 sen. At this PER, Hevea is still deemed very attractive. It may command a PER of 10-12 times- giving the stock an upside of at least 30%.

Technical Outlook

Hevea has been on a strong uptrend since it broke above its long-term downtrend line, RR at RM0.23 in November 2013.


Chart 2: Hevea's monthly chart as at Feb 24, 2016  (Source: ShareInvestor)

The stock's immediate support is its 50-week EMA line at RM1.10. This was tested in January when the spate of allegations mentioned above surfaced. Despite the negative news, the stock held up very well and we can rely on this test as a guide in future trading of the stock.


 Chart 2: Hevea's weekly chart as at Feb 24, 2016  (Source: ShareInvestor)

Conclusion

Based on good financial performance, relatively 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.

Hevea: Weighed down by USD loan, earning still managed to grow

Results Update

For QE30/9/2015, Hevea's net profit increased by 17% q-o-q or 216% y-o-y to RM18 million while revenue grew by 11% q-o-q or 29% y-o-y to RM124 million.

Revenue increased y-o-y due to increased revenue from the particleboard sector (as a result of higher volume and higher average selling price from sales of higher grade, value added products and strengthening of USD) and the RTA manufacturing sector (due to higher productivity, efficiency and also the capability to produce higher value and wider range of products).

Profit before taxation increased y-o-y due mainly to better performance in the particleboard & RTA manufacturing sectors despite being impacted  by  unrealized  exchange loss of  RM10.23  million due to the translation of the USD denominated term loan.


Table: Hevea's last 8 quarterly results


Chart 1: Hevea's last 32 quarterly results

Valuation

Hevea (closed at RM1.39 yesterday) is now trading at a PE of 9.7 times (based on last 4 quarters' EPS of 14.3 sen. At this PER, Hevea is still deemed fairly attractive. It may command a PER of 12 times.

Technical Outlook

Hevea has been on a strong uptrend since it broke above its long-term downtrend line, RR at RM0.23 in November 2013. The 30-month EMA line may serve as its uptrend line, with support at RM1.10.


 Chart 2: Hevea's monthly chart as at Nov 17, 2015  (Source: ShareInvestor)


 Chart 2: Hevea's weekly chart as at Nov 17, 2015  (Source: ShareInvestor)

Conclusion

Based on good financial performance, relatively 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.