• One of HLIB export-oriented stock picks riding on the renewed weakness in Ringgit. The ongoing risk aversion is expected to further strengthen US$, leading to weakening bias in Ringgit, which bodes well with our advocate for exposure in export stocks. EVERGRN remains one of HLIB institutional top export-oriented picks with target price of RM1.48 or 46.5% upside. Against USD, RM had depreciated 6.3% mom and 7.9% 4QTD to end at RM4.464 yesterday.
   
• Attractive valuations with good earnings visibility. At RM1.01, the stock is only trading at 7.5x FY17 P/E (about 12% below 10-year P/E of 8.5x and 23% discount to its peers), supported by core earnings CAGR of 69% over FY15-17 and decent FY16-17 dividend yield of 3.4-4.0%. The P/B of 0.75x is also trading at 12% and 58% discounts to its 10-year average P/B (0.85x) and Hevea’s P/B (1.81x), respectively.
   
• Look beyond 2016. Evergreen’s share price hit a 52-week low of RM0.735 (1 Sep) following the weak 2Q16 results. We see limited downside risks in anticipation of improving results in FY17, amid expectations of stabilising ASPs of MDF and better productivity in the absence of plants’ scheduled maintenance and shutdowns. We also advise investors to remain patient, as we see more earnings growth catalysts coming in FY17, due to management’s ongoing efforts to further improve the company’s efficiencies and product diversification.
   
• A decisive breakout above 30-d SMA (RM1.05) breakout will spur more upside towards RM1.14-1.21 zones. We believe Evergreen’s share prices appear to be at the tail end of its short term downward consolidation, as prices are building base above the 100-d SMA following the bullish Marubozu formation in early Oct. A decisive close above immediate resistance at RM1.05 (30-d SMA) will spur prices higher to RM1.14 (25 Oct high) before reaching our LT objective at RM1.21 (2 June high). Supports are situated at RM0.975 (38.2% FR) and RM0.935 (50% FR). Cut loss at RM0.93.

Source: Hong Leong Investment Bank Research - 29 Nov 2016