EFB’s 9M15 earnings were largely in line with our and consensus’ expectations, representing 80% of our full-year estimates. We adjusted our earnings forecasts upwards for FY15-FY17 by 3.2%-5.2% as we fine tuned our cost inputs and USD/MYR assumptions. Maintain NEUTRAL with a revised TP of MYR2.23 (from MYR2.12, 4.2% upside), pegged to an unchanged 10x P/E to FY16F EPS.

Largely in line. Evergreen Fibreboard’s (EFB) 9M15 core earnings were largely in line with our and consensus’ expectations, making up about 80% of our full-year estimates. EFB’s core earnings continued to improve in 3Q15 by registering a profit of MYR27.6m (+15.5% QoQ) despite revenue remained somewhat flat (-1.5% QoQ), mainly due to a stronger USD against MYR (+11% QoQ) and cost savings derived from its internal operational restructuring. As a result, EFB recorded a higher net profit margin of 10.8% in 3Q15 (2Q15: 9.2%).

Outlook and forecasts. We expect EFB’s bottom line to continue to benefit from its ongoing operational restructuring on top of a favourable macroeconomic environment. We adjusted our FY15F-FY17F earnings forecasts upwards by 3.2%-5.2% to MYR94.0m-MYR125.1m as we fine tuned our cost input assumptions as well as revise our USD/MYR assumption for FY16/17 to MYR4.20 (from MYR4.00).

Maintain Neutral. We maintain our NEUTRAL call with a higher TP of MYR2.23 (from MYR2.12, 4.2% upside) following our earnings adjustments, pegged to an unchanged 10x FY16 P/E. We believe that most positive factors have been priced in. Main upside risk to our recommendation would be a re-rating of the stock driven by liquidity. The downside risks include potential depreciation of the USD and raw material prices, lower-than-expected demand, as well as poor execution in restructuring.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

EFB is a medium-density fibreboard and particleboard manufacturer with a presence in Malaysia, Thailand and Indonesia.

Source: RHB Research - 23 Nov 2015