TSH Resources- Fire Incident at Ekowood Plant

Date: 03/06/2020

Source  :  PUBLIC BANK
Stock  :  TSH       Price Target  :  1.03      |      Price Call  :  HOLD
        Last Price  :  1.10      |      Upside/Downside  :  -0.07 (6.36%)

TSH Resources reported that a fire occurred at its wholly-owned Ekowood business in Gopeng, Perak last Monday. The Group clarified that the operational impact is not expected to be material though the estimated loss has yet to be ascertained. The cause of fire incident was not disclosed. We make no changes to our earnings forecast pending further investigation by the management. The company’s share price has recently shown positive momentum in tandem with the CPO price recovery. Maintain Neutral call with an unchanged TP of RM1.03.

  • Background of Ekowood. It is principally involved in manufacturing and marketing engineered hardwood flooring, which is based in Gopeng, Perak. Majority of its sales derived from the export market with its key markets being Australia, US, Europe and Vietnam. It also undertakes installation of the flooring mainly for the local new high-rise projects. Based on FY19 annual report, it contributed sales of RM28m or 3.3% of the total group sales.
  • Not the first time. It is worth noting that it is this is the second time for a fire incident took place at the same factory. The previous fire incident was a year ago and it took nearly a year to fully resume all production lines.
  • Well insured. Management guided that all its Ekowood assets are sufficiently insured and it does not expect material impact on the Group. To recall, the company successfully sought a total insurance claims of RM41.7m from the previous fire incident. Nevertheless, given that it is a repeated incident, we are of the view that insurance cost will be more expensive for Ekowood going forward.

Source: PublicInvest Research - 3 Jun 2020

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