The Daily Pulse of Bursa Malaysia

Evergreen poised to turn the corner, boosted by pick up in demand from the US and EU

zaclim
Publish date: Mon, 10 Jun 2024, 08:34 AM
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Evergreen Fibreboard Bhd saw some bullish momentum in its share price with no sign of it abating.

It is now trading close to its 52-week high of 38 sen seen in September last year.

The counter rose 33.3% over the past year to close at 36 sen on June 7.

It was trading at a low of 26 sen a year ago.

The stock will likely extend its upward trajectory towards the 38 sen and 42 sen region in the near term.

Investors were probably concerned over its loss making position as it posted a loss of RM33 million in FY23.

However, the wood manufacturer is anticipated to see a turnaround in the second half of this year.

According to HLIB, this will help the company return to the black in the full fiscal year 2024.

The research house expects Evergreen to post a net profit of RM10.5 million and RM19.5 million in FY25.

Going into the second half of the year, Evergreen’s return to profitability will be driven by a number of factors.

For one, the new capacity in the Indonesia MDF line will be coming online in 3Q24.

The increased capacity in the Indonesia MDF line can be absorbed by the local Indonesian and Middle Eastern markets.

A recovery in furniture demand from the US and EU will also be Evergreen’s growth catalyst.

Another key catalyst for rising demand could be the anticipated recovery in the US housing market in anticipation of a rate cut.

A meaningful rebound in the demand from US will be significant to local furniture players, as the US market accounted for around 49% of Malaysia’s wood furniture export.

Should this materialise, panel board makers like Evergreen will be among the first to benefit as Malaysian furniture manufacturers replenish their panel board inventories.

Evergreen focused on developing new markets by increasing exports of Ready-to-Assemble (RTA) furniture to Japan after facing a slowing furniture demand from the US and EU,

This strategic shift has yielded encouraging results, with exports to Japan now accounting for 20% of it’s RTA sales.

Given the stringent compliance standards in Japan, Evergreen’s successful penetration could pave the way for expanding its client base and product offerings, potentially including panel board exports to Japan in the future.

Investors should look at this counter, which looks more than capable to giving more upside to its shareholders in the near term as it turns the corner.

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