HLBank Research Highlights

Technical Tracker - FLBHD - Anticipate stronger quarters ahead; Poised for a downtrend line breakout

HLInvest
Publish date: Fri, 05 Nov 2021, 09:52 AM
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This blog publishes research reports from Hong Leong Investment Bank

FLBHD (listed in April 2011) is a high-quality plywood producer in Malaysia with many accreditations from reputable international bodies such as California Air Resources Board (CARB), International Wood Products Association (IWPA), and export standard specification of Japanese plywood. It focuses on the manufacturing and sale of plywood (generate over 95% to FY20 revenue), veneer and laminated veneer lumber (LVL). The group is also reusing bulk waste to generate biomass energy to supply electricity to its operation. FLBHD exports over 95% of its products, mainly to the US (76% of FY20 vs 66% in FY19), Taiwan (7% of FY20), Thailand (5% of FY20), HK (4%), Japan (2%) and others (6%). Major competitors are coming from Vietnam, Indonesia and China.

Promising North America RV industry outlook. FLBHD will continue to expand its customer base in the US lucrative recreational vehicles (RV) sector, which contributes over 60% to its US sales. According to the Research & Market report, the RV market was valued at USD31bn in 2020, and it is expected to reach USD48bn by 2026, registering a CAGR of 7% during the forecast period (2021 - 2026). On the back of the Covid-19, the global RV market is expected to witness strong growth, especially in North America and Europe. As these vehicles provide a reliable and personal way to travel, it is considered the safest travel alternative during the pandemic, while maintaining social distance norms.

The worst is likely over. We believe the turnaround in 2Q21 is likely to filter through in 2H21 and FY22 (despite the 2-month lockdown in July/Aug) riding on 1) the improving operating business environment since Sep; 2) promising RV prospects; 3) high ASP of wood-related products; 4) favourable RM/US$ (HLIB: RM4.16 average for 2021); 5) sustainable logs supplies. FLBHD is currently trading at 0.58x PB (18% discount against its peers and 28% lower than 10Y average), supported by strong netcash/share of RM0.78 and potential dividend payout in F21 in anticipation of a better 2H21 and solid balance sheet. To recap, FLBHD declared 3-5sen dividend (or 3.2-5.3% DY) in FY19-20 despite incurring losses.

Poised for a downtrend line breakout. After sliding 23% from 52-week high RM1.22 to RM0.94 (3 Nov), we expect FLBHD to stage a downtrend line (DTL) resistance breakout (near RM0.95) soon as the stock continues to trend firmly above key MAs. A successful DTL breakout would spur share prices toward RM1.00 and RM1.05 (30 Aug) before hitting our LT objective of RM1.22. Collection range is RM0.88-0.95 whilst cut loss is pegged at RM0.87 zones.

Source: Hong Leong Investment Bank Research - 5 Nov 2021

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