Results Update

Evergreen reported its results for QE31/12/2009. Its net profit increased by 34% q-o-q or 8-fold y-o-y to RM41.6 million while turnover increased by 5.8% q-o-q or 30.5% y-o-y to RM224 million. The improved performance was 'mainly due to higher sales volume as demands have started to recover following the sharp collapse triggered by the global financial crisis late last year. As a result of such recovery and coupled with the cost cutting measures implemented and improved operational efficiency, the group was able to turnaround quickly to register a significant increase in profitability.'


Table 1: Evergreen's 8 quarterly results

We can see Evergreen's top-line continued to grow in the past 2 quarters after surpassing the previous high recorded in QE30/9/2007 but its bottom-line is still short of its previous high achieved in QE30/6/2007 (see Chart 1). What's surprising is that the prices of MDF & Particleboard actually peaked in the 2nd half of 2008 (see Chart 2).


Chart 1: Evergreen's 22 quarterly results


Chart 2: Prices of MDF & Particleboard from Jan 2007 to Jan 2009 (Source: ITTO)

Valuation

Evergreen (at RM1.60 as at 4.00pm) has a PER of 9.4 times (based on last 4 qaurters' EPS of 17 sen). If it can maintain the same level of profitability of the past 2 quarters, then its full year EPS may hit 28 sen. This would translate to a PER of 5.8 times. At this multiple, I believe Evergreen is fairly attractive.

Technical Outlook

From the chart, we can see that Evergreen is rising in an uptrend. It should have good support at between 50 & 100-day SMA lines (say, RM1.30-40) & could potentially hit a reaction high of RM1.80-90.


Chart 3: Evergreen's daily chart as at Feb 23, 2010_11.00am (Source: Quickcharts)

Conclusion

Based on satisfactory financial performance, attractive valuation & bullish technical outlook, Evergreen is a good stock for long-term investment.