Happy Monday Everyone. This is a translation of my recent article. Hope you all enjoy it. Thanks :)
Hevea was once a controversial and hot stock in 2015. The stock price has rocket up from RM1.68 to RM 3.81 and continue its ride after stock split to RM 1.70. It is mainly due to the strengthening of USD dollar.
However, in this year, the performance of its share price is less satisfying due to the rebound of MYR in the late 2015 and the malicious attack of a blogger. Hevea has lost its charm since then and currently trading at the level around RM 1.15 to RM 1.24.
( i ) Core Business
- manufacture Particleboard and Ready-to- Assemble Furniture ( RTA )
- Each has contributed half of the revenue
- The main export countries included Japan ( 30 % ) and China ( 20 % )
( ii ) Financial Result
- Revenue
It has grown from 373 M in 2011 to 503 M in 2015, ( average 5 % per year )
- Profit
Tremendous growth. From 3.34 M in 2011 to 73.57 M in 2015. ( average 20 % per year )
- Profit Margin
The phenomenal growth of profit is mainly contributed by the increase of profit margin throughout the years.
Profit margin has increased significantly from 0.9 % in 2011 to 15% in 2015.
- Cash Flows
Cash flows has been improved significantly too from 44M in 2015 to 92M in 2016.
It also should be noted that Hevea has became net cash company in March 16 after paying off their USD debt.
- Debt to Equity ratio
2015- 0.39
2016- 0.2
The total liabilities of company has dropped from 135 M to 74 M
( iii ) Competitor ( Evergreen )
- Market Capitalization
Evergreen - 863 M
Hevea - 554 M
- PE
Evergreen - 9.27
Hevea - 6.9
- Dividen ( 2016 )
Evergreen- 1%
Hevea - 1.45 %
- Profit Margin ( 2016 )
Evergreen - 8 %
Hevea - 13.8 %
# To summarize, compare with Evergreen, Hevea has better profit margin and low PE and also higher dividend yield.
( iv ) Advantage
- Quality and eco-friendly products
The company's products are focused on high-end customers which has better profit margin.
Its quality of the products can be proved by its capability to export to the Japan and China.
- Stable and healthy financial position
Hevea has turned to net cash company and debt has reduced significantly.
- Low PE
Compare to its competitor ( Evergreen - 9.27 ), Hevea has a lower PE of 6.9
- Tokyo Olympic 2020
As mentioned above, Japan is the largest export country of Hevea.
Tokyo Olympic will definitely help to boost the demand of its products.
- Stable currency
Beyond doubt, the strengthening of MYR recently will affect the profit of Hevea, but it has stable in the last few months at the level of RM 4.00.
I believe that as long as it sustains in the current level, it will not affect the profitability of Hevea.
After all, we invest in a company for its value not the up and down of the currency.
( v ) Disadvantage
- The decline of economic of Japan and China
- Strengthening of MYR
Conclusion, I believe that Hevea is a company with strong fundamental and endless prospect and worth more than its current price.
* For sharing purpose. NOT a buy or Sell call. Thanks :)
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