HeveaBoard’s (Hevea) annualised 1QFY15 core net profit of RM17m was above expectations at 24% above of our full-year forecast after stripping out unrealised forex losses of RM3m on its US$ term loan. As expected, no interim dividend was declared. The 1Q gross margin of 21.4% exceeded our full-year estimate of 18.8%, driven by stronger particleboard margins. We raise our FY15-17 EPS forecasts by 5% on higher gross margin assumptions (+60bp). Our SOP-based target price is lifted accordingly. Potential re-rating catalysts are its proposed stock split (which will boost liquidity and remove its liquidity discount), higher dividend payout and earnings delivery. Hevea is still undervalued, trading at an undiluted FY15 P/E of 5.4x. Maintain Add.

Operational review
Excluding the unrealised forex loss of RM3m on its US$ term loan, Hevea experienced a blowout quarter as annualised 1Q15 results came in 24% above our full-year forecast. The sharpest yoy improvement was seen in the particleboard division, where underlying pretax margins improved from 5% in 1Q14 to 22% in 1Q15 and pretax profit surged 285% yoy given the 1) sharply-stronger US$, 2) improved product mix of higher sales of E0-super E0 boards, which have better average selling prices, and 3) lower finance costs. The results are even more encouraging considering that 1Q is a seasonally-low period for the particleboard division given the long Chinese New Year holidays in China, which accounts for 40% of particleboard sales. The positive results were mitigated by pricing pressure, where customers have started asking for discounts given the strong US$.

Balance sheet de-leveraging rapidly
Hevea’s net gearing improved sharply qoq from 17% at end-4Q14 to 9% at end-1Q15. Hevea is on track to turn net cash by end-15, in line with our expectations. This puts the company in a position to declare higher dividends, which is another catalyst for re-rating, in our view. Hevea has recently committed to an additional RM7m in capex over FY15-16 to upgrade/modernise its already state-of-the-art equipment as it moves up the value chain towards higher-margin particleboard products, where prices are less sensitive to global supply pressures. This can be comfortably financed by its internal cash flow and should not affect its ability to pay higher dividends.
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Heard that CIMB research out with new TP : RM4.56,true?
Does anyone have a copy? Can share?

No Brain Investment?

I do see the selling by Mondrain a buying opportunity

enning22, sorry to see no sifu enlighten u. I do like to have an answer also. With all the tail wind in its favour, I agree that Luxchem should have a great 2015 at the very least.

Good to see diligent investor like tan22. Great buying opportunity

2.5 sens in June and another one in February. Hopefully 5 sens p.a.

Tarita, Engine started?

The major shareholders are a senior couple. Together with the daughter, they formed the management team. They don't seem like aggressive person to me. After reading the annual report & quarterly reports, I opine that they are very pessimistic person.

Privatisation will not benefit the shareholders much, right? I prefer to enjoy the handsome dividend over a long period of time with steady capital growth.

OK load again

Tarita, where & how you get the TP 0.88. Please share, thank you.

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1917653

I have both mother & son. My vote go to WB. The big sale (11M?) depressed the price. If mother stay high, the son will eventually catch up. The prenium will climb back to 20sens+. Buying opportunity.

Buying of mother is more aggressive today. What's the logic???

The total dividend for the year is 18.5 sens. At 3.11, the yield is still 5.95%

Excellent results. Record Revenue and Profit. Better profit margin. Growth in dividend.

The right issue and proposed acquisition will drag down the EPS in the near term but should argue well in the long run.

Thank for the detail write up on CCMDBIO. I do like the long the long term story and agree with your view. It needs very strong financial muscle & patient to hold on & see through the right issue exercise.

Agree wth Alex that I don't see a double top. However, I need more vol to be convince of a breakout

Ok. Hope it can breakout soon

Sorry I am confused here. The 52 week high is 2.05. Why it is in uncharted area? I do agree that momentum is strong and seems to be very control in collection

Read Note 22 (i) USD Loan RM106,160,000, total loan RM121,798,000. USD Loan is 87%. Am I right?

Absolutely. Well said!!!

Hi aunloke,I am not sure of its production capacity.I beleive the profit margin will improve and hence earning. Even if I am wrong, the present EPS is satisfactory.

Hi ytoh1688,Hevea products are in demand and I read somewhere that Tampin has the highest density of rubber trees in Malaysia.

The financial trouble is over. Debt is reducing fast. EPS is expected to be at least 32sens for FY2014. At 1.77, PE is low at 5.53. Profit margin is improving due to the introduction of higher quality and margin products. Dividend growth will be accelerated once the management is comfortable with its debt level.High retained profit => Bonus issue is likely.

Is that enough reasons?

Hi aunloke, as at yesterday closing, 50% of my ROI gain for the year was gone. However, I am not ready to press the panic button yet. I am holding some warrant as well for the simple thinking that it gives me more leverage. Need time to digest and understand what you wrote.

Today market is looking better, Cheers!

Hi aunloke, great to see u here for the first time. It boost my confidence on the stock. I have a large holidings & highh expectation on the counter.

The former MD is selling his stake to M/s New Orient Resources Sdn. Bhd. (Company No. 1109740-K). Anyone have any info regarding this new shareholder? Is it good for the company?

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1754497

Thanks, aunloke. I will soon take a break from the market. I have been searching but not finding anything to my liking as well, I am happy to close the year now as a winner.

I am holding some warrant also. I guess there will be some fair arrangement if the management is planning a Bonus issue. Can someone shed light on the subject.

I understand that bonus issue does not add value fundamentally. However, in the case of Hevea, it makes sense.

If retained profit is capitalised by issuing bonus shares, it will be easier for the management to restructure its debts. Perhaps, cheaper and longer. It can also free more cashflow for CAPEX if necessary.

The bonus issue will mprove liquidity and be more attractive to institutional investors.

The company can easily afford a 1:1 bonus issue. After that, the share price should stay above RM1. It will not be a penny stock anymore.

Guys, it is only my personal opinion. Feel free to comment.

Hi aunloke, which are the counters that you are looking now?

Agree, it will be a mistake to sell at 1.90 now

Guys, can we have the break out party now???!!!!!?????

aunloke, thanks. I share the same view.

GG, I share the same vision on dividend but not next year. 5 sens for FY2015 will be great. Happy if it reach 20 sens in 2017.

Nevertheless, it is a stock that I believe in and still accumulating at this wonderful price.

Hi aunloke, I am still holding on to a lot of YOCB.

No question that YOCB had a bad final quarter in term of profit but the FY2014 profit is only 2% lower than FY2013. The final dividend remains at 2 sens, making a total of 4 sens for the year. The revenue increased by 31.9% at the expense of 55.9% contraction in profit. Although the management blame it on higher operating cost, I am not sure of the wisdom of this approach. My main worry is the deterioration of earning although the management is confident of a satisfactory growth with plans and strategies already in place to weather these challenging times.

What do you think?

Agree, all eyes on the results. Expectation is high.

Good thinking, sangharimau. Selling is dry. There is still a long way to its true value. I will ride with you

Thanks Icon8888, a very good report

Very Very good counter

I don't mind others having different views. After all, we are here to exchange and share our thoughts. Just don't get too personal.

Thanks Candygirl for your tip.I will take a look.

I have been studying Hevea for a long time before I jumped it and I am taking a long term view. However, if it shoots up too much on or before the next quarter announcement,I will take profit also.

"Deemed interested by virtue of his substantial shareholdings in HeveaWood Industries Sdn. Bhd. pursuant to Section 6A of the
Act and deemed interested by virtue of HeveaWood Industries Sdn. Bhd. being entitled to control the exercise of 100 per cent
of the votes attached to the voting shares in Gemas Ria Sdn. Bhd."

Yoongs are controlling HeveaWood Industries Sdn. Bhd and they are not selling.

Liang does not have many to sell

Liang Chong Wai is from Hong Kong with only 315,000 shares in his name. He is not a director, I view him as an investor cash out his chips. NO big deal. The Yoong family still in good control of the company

Good Job, Ironbull. I am expecting good results & dividend announcement next month

SS3U, I agree with your observations. I am ignoring the noise and accumulating as much as possible at current level.

Time will tell.

Lately, there are a lot of TAKE OVER news including Superlon.

In YOCB case, it is a family own business and the likelihood of being take over is not high.

We are on the same page about exit and looking for another potential if valuation is too rich.

Hi aunloke, it been a long time since last heard from you. No news at all from YOCB. I was holding it all this while. I like its Home Harmony concept and decided to stay with it but if price run up too much because of TAKE OVER news, I might EXIT with a smile.

Hi Tey Tian Foo, I agree Hevea looks good but not sure about the sales outlook is good. Will you be able to elaborate?

Yup, some desperado sold it down to 2.80,CRAZY! 2.96 is a more reasonable level

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1639801

3rd Q results, anyone any comments?

Home Harmony is doing well.

Inventories & receivable raising??