Analysts reiterate positive view on Evergreen

KUCHING: Analysts have reiterated their positive view on Evergreen Fibreboard Bhd (Evergreen) following a recent meeting with management.

Taking cue from the adverse weather condition and glue cost, the research arm of Hong Leong Investment Bank Bhd ( HLIB Research) opined that the first quarter of 2017 (1Q17) earnings performance will come in weaker, both year on year (y-o-y) and quarter on quarter (q-o-q).

Despite having anticipated a weak set of 1Q17 results, HLIB Research remained positive on Evergreen’s earnings fundamentals, underpinned by Evergreen’s move to di versify into tropical wood-based products and commencement of operation of the new particleboard line and additional ready-to-assemble furniture line.

In addition, the research arm opined that higher overall production capacity, from the second half of 2017 (2H17) onwards, will result in higher glue usage and hence result in improved economies of scale at Evergreen’s glue plant.

According to HLIB Research, Evergreen is slowly diverting its dependency on rubber wood and moving to tropical mixed wood which costs an additional RM10 per tonne as compared to rubber wood.

“TMW are fungus resistance board which translates to a 20 per cent higher selling price,” it explained.

Meanwhile, on the new particleboard production facility in Segamat – which has capacity of 20,000 cubic metres per month -HLIB Research noted that it will start contributing to Evergreen from July 2017 onwards.

“We are convinced that capacity at Evergreen’s new particleboard line can be easily taken up, due to the shortage for particleboard locally, as local furniture manufacturers, which are the main consumer of particleboard, are currently importing particleboard from neighbouring countries,” the research arm said in a company insight.