Evergreen Fibreboard Bhd 'well-positioned' to weather near-term headwinds, says HLIB Research

NST Fri, May 06, 2022 11:05am - 1 year View Original


KUALA LUMPUR: Evergreen Fibreboard Bhd is well-positioned to weather near-term headwinds, driven mainly by adverse weather and global macro events, Hong Leong Investment Bank Bhd (HLIB) said.

The bank-backed research firm said this was due to the wood-based manufacturer's well-integrated operations and its diversified production bases.

While the company has noted some tightness in log supply in Malaysia due to the longer than usual wet season since the end of 2021, which caused two major floods, it has diversified into using mixed tropical wood and wood chips instead of solely using rubberwood to help alleviate the shortage in rubberwood log supply.

HLIB Research said this had helped Evergreen to maintain near-full utilisation of its particleboard (PB) and ready-to-assemble (RTA) plants except for the medium density fibreboard (MDF) plant due to log supply shortage.

"We are not overly concerned about this as these challenges are not structural or permanent in nature.

"Overall, the company is still riding on a positive momentum driven by recovering demand in the panel board and furniture market," it said in a note.

Meanwhile, HLIB Research said Evergreen was also in the midst of installing solar panels across three of its major Malaysian plants.

"The structure for installing these solar panels is 'zero capex' whereby Evergreen does not incur any cash outflows.

"The solar panel operators entirely bear the installation and maintenance costs.

"Evergreen only pays a fixed tariff for the next 25 years at a substantially lower rate than Tenaga Nasional Bhd's standard tariff, thus resulting in cost savings for the company," it added.

HLIB Research has maintained its 'Buy' call on Evergreen with an unchanged target price of 94 sen.

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