Sern Kou is seeing a strong momentum in share price for the past 3 trading days, which is believed to be caused by anticipation of good earnings as well as strong USD-MYR trend, and every increase/(decrease) for 10% of USD will result in RM0.2/(RM0.2) million in PAT.
To recap, the company is principally involved in the midstream business of wood processing, as well as involvement in the downstream business of furniture manufacturing.
Due to strong backlog orders from furniture market, we expect strong demand coming in for its midstream business with circa 30% to 50% increment of processed wood prices.
Historically, the company tend to announce their quarterly results between 21st Feb to 25th Feb, and we believe investors are banking on their potential strong earnings in the coming quarter.
Based on our channel check with its peers, the downstream furniture manufacturing segment for Sern Kou is once again running in full capacity due uplifted restriction following the end of FMCO.
Key downside risks remain on downturn in wood demand, declining processed wood pricing as well as rising of minimal wages.
Should the company recover to pre-COVID level earnings, we foresee an even stronger price-volume action in the upcoming weeks.
Our technical TP is shouting a good entry point at RM0.785 level, with RM1.000 as key resistance.
THE outlook for the Malaysian furniture industry is positive this year although it continues to face some lingering challenges, say research analysts.
A general bullish outlook is due to a number of factors that include the relaxation of movement restrictions, which help furniture manufacturers resume their operations and enhance their supply chain issues.
Then there is also robust demand from the North America region, driven by work-from-home arrangements and the trade diversion from the United States-China trade war.
From the article: The research unit also notes that while flood-affected households will likely need to replace their damaged furniture, this will only have a marginal effect on the furniture companies it covers (Evergreen Fibreboard Bhd, Homeritz Corp Bhd, Lii Hen Industries Bhd and Heveaboard Bhd).
This is because these companies are export oriented and have less than 5% of their sales from the local market.
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....
Gerald Liew Wei Han
6 posts
Posted by Gerald Liew Wei Han > 2022-01-31 21:25 | Report Abuse
This company.. much potential to be seen.
Obviously the shares had been cornered, wanted to spike when whole market talk about wood prices. Added another 20k units today.
Hopefully they will give angpao!