Heveaboard is set to resume its uptrend movement as it climbed above the recent high of MYR0.565 on improved trading volume – marking a new YTD high, after breaching above the MYR0.565 immediate resistance on stronger volume – printing a “higher high” bullish pattern. The uptrend which started on 21 Mar may persist until the stock reaches MYR0.60, before marking the MYR0.64 resistance. Conversely, the stock may reverse direction if it falls below the MYR0.54 support, as it forms a “lower low” bearish structure.
The company has RM120m net cash; take that out from the current market capitalisation, the company is selling for RM130m only. One-year depreciation charge is RM30m, which more than covers for all sorts of capex the company wants to do. So, the company can actually declare all its profits as dividend without affecting its net cash balance of RM120m. It should be able to make at least 3sen net profit per share a year. Potential dividend yield will be very attractive.
healthy balance sheet with net cash of RM132.7m or NCPS of 23.4 sen (51.6% of its market capitalization) which should provide downside support to its share price.
Excluding net cash, the company is selling for less than RM100m. Net operating cash flow for 2022 will be at least RM35m. First 2 quarters of 2022 saw it make RM22m operating cash flow. Japan is opening up its tourism again to foreigners, and a stronger economy in Japan bodes well for Hevea. It’s a super-cheap price now for the major shareholders to take the company private.
The Net Cash is not in doubt. Stock price hit peak in 2017 when dividends was also high at 7.7 sen that year paid 4 times a year. Since then, stock price fell in line with dividend drops, from 7.7 down to 1.25 last year when it was paid twice only, and this year, so far 1 time for 1 sen and unclear. Clearly company is conserving monies due to recent losses, so, this company can also lose monies which they need to turnaround. Otherwise, net cash will also go down, dividend goes down, stock price goes down. Nice to see stock price is downtrending, for those with cash and holding power for several years (e.g. 5-10 years) this one deserves to be a part of one's diversified portfolio. 1 sen / 36 sen < 3% dividend yield which is not that attractive relative to FD, but if they want to stabilize the price fall, then, just give another 0.5 sen dividend yield and suddenly, it's a lot better than FD rates and company has much, much more cash to pay 0.5 sen dividend ... the question is will it do so? Next price fall target could be near 30 sen, at this price, I will definitely add more. For long term accumulators, this one is worth the risk, betting that company will turn profitable again, like it has many years prior. Risky for sure, but sleep soundly when it's part of a diversified portfolio.
As a dividend investor, I like the Group decided to give a token 1 sen dividend when it is making losses. The Group has a policy of paying 30% of its Profit After Tax as dividends, so, this company needs to turn around into profits first, before the stock price fall stabilizes. Pretty sure market is watching closely since it's been nearly 2 years now ... the question is will it turn around? What catalysts? And when? because at a low base price, a turnaround will give 100% price gains.
B2. Material change in profit before taxation for the quarter against the immediate preceding quarter The Group reported a loss before tax of RM3.56 million for the current quarter compared to a profit before tax of RM3.46 million for the immediate preceding quarter ended 30 June 2022, a change from profit to loss before tax by RM7.02 million or 202.89%. The particleboard sector experienced a general slowdown in the market resulting in lower sales and production volumes for the reporting quarter. The RTA sector also experienced a general slowdown, and a significant cost increase due to the implementation of minimum wage in May 2022.
I am a fundamental investor so I look at company performance. Over the past 12 years, the company had an average ROE of 9%. In comparison, the mean ROE of the Bursa furniture companies averaged 8%. So it outperformed a bit.
The price has dropped by about half since a year ago. Has the business prospects dropped by half? Over the past 13 years, it achieved a mean ROA of 6% compared to the mean of the Bursa furniture sector that averaged 5%. https://www.malaysiastock.biz/Blog/BlogArticle.aspx?tid=26387. Of course you have to dig deeper but at first look, the company has a good track record.
The company has RM120m net cash; take that out from the current market capitalisation, the company is selling for RM130m only. One-year depreciation charge is RM30m, which more than covers for all sorts of capex the company wants to do. So, the company can actually declare all its profits as dividend without affecting its net cash balance of RM120m. It should be able to make at least 3sen net profit per share a year. Potential dividend yield will be very attractive.
I have 2 reference companies with detailed analysis - Eksons and Taann - that I used when hunting for companies in the timber/wood-based sector. With this lens, I found that Hevea ROE pre-2018 was much better than these reference companies. But post-2018, Hevea ROE lies in between these 2. From a fundamental perspective, I would focus on Taann.
HEVEA +4.29%. Nice. Looks like it wants to go up, but plenty of resistance ... Still good enough to make my portfolio rise to all time high again. That's 3 times this week!
I accumulated a bit at 33 sen recently. Since end last year, the A/D line is slowly rising, notwitstanding flat price. This technical divergence suggests that someone has spend a long time to slowly accumulate this stock without moving its price ... I don't know who, but I am following. I am okay if it take 2 years to move, because once we identify a stock with higher probably of being "goreng" later, we follow by buying more at lower prices. For this stock with sound fundamentals, lots of net cash, the only risk is if the manipulator can't accumulate enough. At this juncture, they should have plenty of stock, just might not meet their quota yet to start the push. It's now nearly a year of accumulation.
Keep this type of trading extremely small. My trade here is more price speculative. I haven't done enough research to justify owning more than 1.5% of my portfolio. This is old habit from looking at price charts only, without really looking at its longer term business, aside from a few balance sheet glances.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
stockraider
31,556 posts
Posted by stockraider > 2022-05-05 09:42 | Report Abuse
Go for it loh!
Can win mah!