2Q20 core net loss of –RM10.5m (vs. core net loss of –RM11.7m in 1Q20 and core loss of -RM11.3m in 2Q19) brought 1H20 core net loss to –RM22.6m. This was in line with our expectations, making up 45.5% of our full-year forecasts. Our forecasts remain unchanged. While our earnings forecast is unchanged, we now ascribe a higher PB multiple of 0.2x (-0.5SD below 2 year mean) pegged to FY20 BVPS from 0.16x previously, with operational risk associated with the MCO now normalising. Our TP rises from RM0.20 to RM0.25. Maintain HOLD.

In line. 2Q20 core net loss of -RM10.5m (vs. core net loss of -RM11.7m in 1Q20 and core loss of -RM11.3m in 2Q19) brought 1H20 core net loss to -RM22.6m (1H19: - RM23.6m).This was in line with our expectation, making up 45.5% of our full-year loss forecast. Core net profit number was arrived at after adjusting for foreign exchange gain of RM0.3m.

Dividend. None declared (1Q19: none). 1H20: None, 1H19: None.

QoQ. Revenue decline of -24.0% was due to lower sales volumes arising from temporary shutdown of operations during MCO period. Despite weaker sales, core net losses after tax of -RM10.5m was slightly lower than -RM11.7m loss registered in 1Q20. This was due to lower log cost and favourable sales mix.

YoY. Despite higher panel board ASPs, sales in both Malaysia and Thailand declined due to weaker demand from Covid-19 outbreak. Loss before tax of -RM10.5m was slimmer YoY (-RM11.3m) due to reasons mentioned in QoQ paragraph.

YTD. Core net loss of -RM22.6m was slightly slimmer than -RM23.6m in 1H19 in spite of significantly weaker sales (-16.2%). This was due to higher ASPs, lower log cost and favourable sales mix.

Outlook. We expect the panel board market to remain competitive with continued intense competition from neighbouring countries. While better ASPs during 2Q20 is an encouraging factor, we are reticent to factor it in going forward, as we expect Evergreen’s peers to return to regular production capacity as lockdown rules ease all over the region. While we expect Evergreen to continue to pursue cost saving measures, unavoidable macro factors is expected to translate to another year of losses in FY20.

Forecast. Unchanged.

Maintain HOLD. While our earnings forecast is unchanged, we now ascribe a higher PB multiple of 0.2x (-0.5SD below 2 year mean) pegged to FY20 BVPS from 0.16x previously, with operational risk associated with the MCO now normalising. Our TP rises from RM0.20 to RM0.25. Maintain HOLD.

Source: Hong Leong Investment Bank Research - 14 Aug 2020