LUMBER PRICES TRIPLED SINCE LAST YEAR, WHO WILL BE THE BENEFICIARY?

Apart from palm oil, steel, aluminium, tin, and dry bulk prices, little does investors know that lumber – had in fact more than tripled in price since May last year.

The spike in lumber prices is not coincidental – but an actual underlying problem for North America or the world for quite a number of times already. Based on academic studies, since 1990 the beetles are living longer and causing more devastating damage to the lumber industry. The infestation problem had accelerated the shortage issue in Britain as well as rising demand in North America region.

Apparently, people still in high demand for wood despite fighting against the pandemic. New homes, renovations, repair works, the new in trend DIY woodworks for your backyard and last but not least, booming furniture demand had worsened the shortage of lumber. Hence, it is truly interesting to see only a few investors had taken note on the booming of this sector.

One company, however had been consolidating in price and would soon experience another spike in share price in line with their explosive profitability in the sector.

And yes, this company is Annum Berhad (KLSE:5082) – which is formally known as Cymao Holdings Berhad.

After the disposal of its subsidiary – Poly-Ply Industries Sdn Bhd, the company is left with 4 wholly-owned subsidiaries, namely Cymao Plywood Sdn Bhd, Inovwood Sdn Bhd, Syabas Mujur Sdn Bhd and one key company – Annum EPCC Sdn Bhd (Formally known as Billion Apex Sdn Bhd). As we can see from the latest quarterly report, Cymao Plywood and Inovwood had given good profitability to the company from the sale of plywood and round logs, which adhere to the global rising demand of lumber – and in price of course.

However, a more important part of the company should be noticed by investors too. The company, via its wholly owned subsidiary Annum EPCC Sdn Bhd had mentioned the diversification into construction business will potentially increase their earnings in future.

Most people might not notice this, but as someone who closely follows the construction industry, I had noticed something very interesting in Annum’s financial year 2020 annual report.

Do you recognize these names?

Dato’ Sri Liew Kok Leong and Dato’ Sri Chin Kok Foong is involved in another wildly successful construction company called Ages Berhad (KLSE:7145). Since the emergence of these 2 entrepreneurs, AGES had successfully turned around by them despite a lot of legacy project unfinished by the previous owners.

You may refer to AGES’s profitability here.

With the emergence of these 2 individuals, I believe ANNUM – apart from growing their profitability via the lumber segment, could benefit from construction activities that are picking up as well. More importantly, the company is named after EPCC. Could they get involved in renewable energy projects that have the same synergy with construction business?

I firmly believe so. And at the same time, I look forward for ANNUM’s growing profit that is going to be announced this month!

*Hint: I expect the profit to be at least 15 million based on price of lumber as well as a more favouring USDMYR to the company.