EVERGRN Is a Leading Medium-density Fibreboard (MDF) and Particleboard Manufacturer With a Presence in Malaysia, Thailand and Indonesia. Currently, the Topline Contribution From the Product Segments Are: MDF (~60%), Particleboards (~20%) and RTA and Value-added Boards (~20%).

Although share price could remain tepid due to ongoing lockdown, potential hike in raw material price amid supply disruption and limited shipping availability, value has resurfaced after tumbling 25% from a 52-week high of RM0.53 to RM0.395 yesterday (+69% upside to HLIB TP RM0.67).

We believe these risks have been largely priced in, supported by a robust FY21-23 EPS CAGR of 77%, undemanding valuations of 10x FY22E (-13% vs 5Y avg 11.5x and -35% vs Hevea’s 15.3x) and 0.32x P/B (-76% vs peers’ 1.4x ). Overall, we expect EVERGRN’s future earnings to remain promising, driven by (i) its healthy order book with visibility of 2-9 months; and (ii) the strength in ASP supported by the strong demand from the local furniture makers as well as from the US market.

The stock is grossly oversold. Any weakness from current prices towards our key supports at RM0.36-0.375 provides a good opportunity to accumulate. A strong breakout above RM0.42 (50D SMA) will spur the price towards RM0.50-0.53 zones.

Source: Hong Leong Investment Bank Research - 6 Jul 2021