Heveaboard Bhd (-ve)
Heveaboard (Fundamental: 2.1/3, Valuation: 1.8/3) triggered our momentum alert for the second time in a week, rising 8.3% to end at RM1.04 yesterday. 

At market close, the company announced that it is venturing into the business-to-consumer market by offering eco-friendly children furniture. It will also turn to digital marketing, in line with its strategies to expand customer reach and engagement. Heveaboard still has over RM237 million unutilised tax incentives, which will be used to offset future taxable profits.

Last Friday, Heveaboard announced its 2Q2015 earnings results. For 1H2015, net profit nearly doubled to RM30.0 million on the back of a 7.6% growth in revenue to RM227.8 million, thanks to higher average selling price for premium grade particleboard and value added products as well as forex gain. 

The company also declared a first interim dividend of 0.5 sen per share, which will go “ex” on September 11. 

Negeri Sembilan-based HeveaBoard manufactures particleboards and ready-to-assemble furniture, which accounted for 43.0% and 57.0% of its 2014 revenue, respectively. In 2014, Heveaboard derived 91.6% of its sales from exports markets, mainly Japan, China, Korea, Philippines and Australia. 

Despite the furniture industry’s cyclicality, Heveaboard has been profitable with fairly consistent earnings in recent years, except for a large dip in 2011 due to the weak US dollar then.  From 2011 to 2014, revenue has grown from RM373.0 million to RM422.4 million, while net profit expanded from RM3.3 million to RM30.2 million.

Notably, the company has pared down its long term borrowings to RM32.6 million at end-June, from RM141.7 million in 2010. As a result, net gearing fell to 4.2%, from 86.6% in 2010. 

The stock trades at a trailing 12-month P/E of 9.0 times and 1.33 times book. Dividends totalled 1 sen per share for 2014 (adjusted for a 4-for-1 share split), giving a net yield of 1.0%.

This article first appeared in digitaledge Daily, on September 4, 2015.