Evergreen Fibreboard - A Triple Digit Leap

OSK - On an annualised basis, Evergreen Fibreboard’s (EFB) earnings beat our and consensus estimates. However, in being conservative, we are retaining our earnings estimates and maintain the stock’s target price at RM2.63, with its BUY recommendation intact. We also note that EFB has declared a second interim tax exempt dividend of 2 sen per share, which brings its total payout YTD to 4 sen per share, accounting for 55.5% of our full-year estimate of 7.2 sen per share.

Maintain BUY. We are keeping our BUY recommendation for EFB as its fundamentals remain intact. Our target price is maintained at RM2.63, derived from pegging its FY11 EPS at 26.3 sen and ascribing to the stock a higher tier building material PE of 10x.

DJ MARKET TALK: Evergreen +1.3%; 1Q Earnings Rose Sevenfold

0545 GMT [Dow Jones] Evergreen Fibreboard (5101.KU) +1.3% at MYR1.51 after reporting better-than-expected, sevenfold jump in 1Q earnings on-year due to improved sales volume, higher selling prices; cost savings from measures to boost plant efficiency also helped earnings, company says. RHB Research maintains Outperform on stock, with unchanged target price of MYR2.35; says one area of concern is impact of MYR appreciation, which is negative for Evergreen's export earnings, but any impact to be temporary given company's ability to pass on forex risks to customers via price adjustments. "Assuming a 1.5-month impact, we estimate this would reduce Evergreen's bottomline by 1% per annum," RHB says.

OSK Revises Upwards Net Earnings For Evergreen Fibreboard

KUALA LUMPUR, April 12 (Bernama) -- OSK Research Sdn Bhd has revised upwards the net earnings of Evergreen Fibreboard Bhd to between 35 and 45 per cent for the financial year ending 2010 and 2011, following the economic recovery and cost-cutting measures implemented last year.

"We see earnings improving this year on the back of higher sales volume and wider operating margins due to the last year's cost-cutting measures" it said in a research note Monday.

The research house also marginally revised higher revenue estimates for FY10 and FY11 by between one and six per cent as a result of higher plant utilisation rates.

OSK Research said Evergreen, excluding its Indonesian plant, was expected to operate at a utilisation rate of between 80 and 85 per cent this year.

The utilisation rate will be subsequently increased to 90 per cent next year in tandem with surging demand for medium-density fibreboards in the Asean region.

evergreengroup.com.my

Evergreen – Dividend payment to continue Outperform

Evergreen – Dividend payment to continue Outperform
Visit Note- 4Q09 capacity utilisation is estimated to be at 78% (+5% qoq) while its current capacity utilisation stands%D�bove 80%. The improvement was due to rising demand mainly from supply shortages. Evergreen remains%D�onfident of achieving more than 80% capacity utilisation in FY10.- Average selling prices increased by US$5/m3 from 4Q09 for 1Q10 orders. Average selling prices for orders received in Dec 09 increased by US$5/m3, which implies that 1Q10’s average selling prices could hover%D�round the US$245/m3 to US$250/m3 levels. Given the current outlook, management is confident thatprices would hold firm at current levels.- Rising commodity prices not a concern. Evergreen expects rubber wood log and glue prices to remain firm%D�uring the year, as historically, these raw materials have generally been relatively stable.- Currently dormant Indonesian plant would restart its operations in 2Q10 given that Evergreen is in final negotiations with its 49% JV.