• Business profile. Focus Lumber Berhad (FLBHD) was incorporated in Malaysia on 30 October 1989 as a private limited liability company and was subsequently listed on the Main Board of Bursa Securities on 28 April 2011. FLBHD’s principal activities are manufacturing and sale of plywood, veneer and Laminated Veneer Lumber (“LVL”), and inves tment holding. Plywood is the core produ ct, generating the bulk of the group’s revenue.
• Beneficiary of stronger USD. FLBHD’s export markets contributed approximately 98% of the group’s total revenue, especially U.S market which contributed about 67% of the group’s total revenue for FY14. Since most of the revenue is denominated in USD, FLBHD’s top and bottom line could be boosted by strong USD.
• Valuation. (1) the stock is currently trading at 9x trailing P/E; (2) net cash per share of RM0.57 which is equivalent to 39% of its share price; and (3) attractive dividend yield of 5.5%.
• On technical front, the share price is about to reverse after recent retracement from RM1.64 on 21 Apr 2015 to recent low of RM1.37 and well supported by 38.2% FR level (RM1.40). Moreover, the stock is grossly oversold and about to bottom out in near term, as substantiated by reading from MACD, RSI and Slow Stochastics oscillators.
• Since FLBHD’s long-term uptrend is still intact, we are targeting RM1.52 (30-d SMA) and RM1.64 (high on 21 Apr 15), with a long term objective of RM1.70. However, immediate supports are at RM1.42 and RM1.39. Cut loss below RM1.37 (Lower-Bollinger band).

Source: Hong Leong Investment Bank Research - 8 May 2015