Investment Keynotes:
 

• Sern Kou is seeing a strong momentum in share price for the past 3 trading days, which is believed to be caused by anticipation of good earnings as well as strong USD-MYR trend, and every increase/(decrease) for 10% of USD will result in RM0.2/(RM0.2) million in PAT.
   
• To recap, the company is principally involved in the midstream business of wood processing, as well as involvement in the downstream business of furniture manufacturing.
   
• Due to strong backlog orders from furniture market, we expect strong demand coming in for its midstream business with circa 30% to 50% increment of processed wood prices.
   
• Historically, the company tend to announce their quarterly results between 21^st Feb to 25^th Feb, and we believe investors are banking on their potential strong earnings in the coming quarter.
   
• Based on our channel check with its peers, the downstream furniture manufacturing segment for Sern Kou is once again running in full capacity due uplifted restriction following the end of FMCO.
   
• Key downside risks remain on downturn in wood demand, declining processed wood pricing as well as rising of minimal wages.
   
• Should the company recover to pre-COVID level earnings, we foresee an even stronger price-volume action in the upcoming weeks.
   
• Our technical TP is shouting a good entry point at RM0.785 level, with RM1.000 as key resistance.
   

Disclaimer: No buy or sell call recommendation are implied in the article, as it was for education purposes only. Please seek advice from your professional advisor before executing trades.