‘He­veaBoard can face head­winds with re­silient busi­ness model’

New Straits Times - - Business -

KUALA LUMPUR: He­veaBoard Bhd has a re­silient busi­ness model that can cope with the cur­rent un­favourable eco­nomic land­scape, based on its re­cent quar­terly re­sults.

JF Apex Re­search said while He­veaBoard was a net ben­e­fi­ciary of US dol­lar ap­pre­ci­a­tion with more than 90 per cent of its rev­enue be­ing US dol­lar-based, its strat­egy of sell­ing pre­mium prod­ucts with higher aver­age price and strong pric­ing power fol­low­ing the short­age of rub­ber­wood could cush­ion the im­pact of mar­gin com­pres­sion.

More­over, He­veaBoard has the flex­i­bil­ity of ad­just­ing prod­uct prices to fac­tor in the cur­rency fluc­tu­a­tions with re­ceiv­ing or­ders of three to four months in ad­vance.

“We ex­pect the ring­git to sta­bilise at the cur­rent level of RM4.20 to RM4.30 in the sec­ond half of this year un­til next year. Hence, it shall not pose any ma­jor threat to the group.

“Sen­si­tiv­ity anal­y­sis in­di­cates that every one per cent strength­en­ing of the ring­git against the US dol­lar would re­duce the group’s earn­ings by 6.6 per cent this year and next year,” it said.

For the first quar­ter ended March 31, He­veaBoard’s net profit grew 24.6 per cent on the back of 8.8 per cent rise in rev­enue.

JF Apex said it en­vis­aged the group’s core net earn­ings to con­tinue its growth tra­jec­tory this year and next year, mainly un­der­pinned by con­tin­ued growth of sales in ready-to-as­sem­ble (RTA) fur­ni­ture, on­go­ing ef­forts in sell­ing high-mar­gin par­ti­cle­boards, and high value-added and wide range of RTA fur­ni­ture.

“Be­sides, He­veaBoard com­mands a healthy bal­ance sheet, with cur­rent net cash per share of 18 sen, which al­lows it to have am­ple flex­i­bil­ity to gear up for fu­ture ca­pac­ity ex­pan­sion and merg­ers and ac­qui­si­tions should any op­por­tu­ni­ties arise,” it said.

JF Apex has a “buy” call and a tar­get price of RM2.12 for He­veaBoard.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.