FLBHD (5197) - Insider Asia’s Stock Of The Day: Focus Lumber

Focus Lumber Bhd 

SABAH-based Focus Lumber (Fundamental: 1.45/3, Valuation: 2.4/3) is involved in the manufacture and sale of plywood, veneer and laminated veneer lumber.

We first featured Focus as our stock pick on December 11, 2014 at RM1.08. It went on to close at a high of  RM1.61 on April 13 before giving back part of the gains in line with the broad market weakness. We think there is further upside potential for the stock given its still-low valuations, high dividend yield and solid balance sheet. 

With 97.8% of Focus’ revenue in 2014 derived from exports, and a significant 64.9% of sales going to the US, the company stands to benefit from both the strong US economic growth momentum and USD.

Focus has bucked the volatile trend of most Malaysian timber companies over the years, which were affected by sluggish housing markets in Japan, US and Europe, as well as low commodity prices.

Its key differentiating strength is its focus on obtaining US environmental and quality accreditation and certification for its products, in order to penetrate the US market better. It was accredited as a CARB Certified Manufacturer in 2008 and a certified Lacey Compliant Wood Products Manufacturer in 2013.  As US economic growth gathers steam, this strategy is paying off.

Focus has been steadily growing for the past 4 years. For the latest 1Q2015, revenue fell 20.6% y-y to RM30 million, while net profit declined 18.8% to RM3.3 million. This was attributed to lower sales volume to the US as a result of a delay in the arrival of vessel departing to the US. 

Dividend per share increased from 6 sen in 2011-2012 to 8 sen in 2013-2014, giving a generous yield of 6.3%. Its dividend payout ratio was 51.5% in 2014.

Currently, Focus is trading at 0.99 times book with an attractive trailing 12-month P/E of 8.65 times. The company has a strong balance sheet with net cash of RM73.8 million at end-March, equivalent to 72 sen per share or 55.9% of its current market capitalisation.


http://www.theedgemarkets.com/my ... -day-focus-lumber-0

Trading Idea: Beneficiary of stronger USD - FLBHD (RM1.30/Vol:166k)

• Business profile. Focus Lumber Berhad (FLBHD) was incorporated in Malaysia on 30 October 1989 as a private limited liability company and was subsequently listed on the Main Board of Bursa Securities on 28 April 2011. FLBHD’s principal activities are manufacturing and sale of plywood, veneer and Laminated Veneer Lumber (“LVL”), and inves tment holding. Plywood is the core product, generating the bulk of the group’s revenue.
• Beneficiary of stronger USD. FLBHD’s export markets contributed approximately 98% of the group’s total revenue, especially U.S market which contributed about 67% of the group’s total revenue for FY14. Since most of the revenue is denominated in USD, FLBHD’s top and bottom line could be boosted by strong USD.
• We like the stock as: (1) the stock is currently trading at 8.6x trailing P/E; (2) net cash per share of 71 sen which is 55% of share price; and (3) attractive dividend yield of 6.25%.

• On technical front, the share price is about to reverse after recent retracement from RM1.64 on 21 Apr 2015 to recent low of RM1.26 and well supported by 61.8% FR level (RM1.25). Moreover, the stock is grossly oversold and about to bottom out in near term, substantiated by reading from MACD, RSI and Slow Stochastics oscillators.
• Coupled with “Reversal As cending Triangle” s ignal on hourly chart, we are targeting RM1.40 (gap on 21 & 22 May 2015 and measurement objective of Ascending Triangle pattern on hourly chart) and RM1.49 (23.6% FR), with a long term objective of RM1.64 (all-time high). However, immediate supports are at RM1.29 and RM1.27. Cut loss below RM1.25 (61.8% FR).

Source: Hong Leong Investment Bank Research - 29 May 2015