KUALA LUMPUR (May 11): Hong Leong Investment Bank (HLIB) Research opined that Evergreen Fibreboard Bhd will profit from a weak ringgit (MYR) as the wood kitchen cabinet company’s sales are largely denominated in the US dollar (USD).

In a technical tracker on Wednesday (May 11), the research firm reasoned this evaluation based on its estimate that 60% of Evergreen’s sales are denominated in USD, while its costs are in ringgit. 

“We expect export-oriented stocks such as Evergreen will come to the limelight in anticipation of a stronger USD amid the US Federal Reserve’s aggressive tightening campaign,” said HLIB Research. 

The firm also noted that the USD against MYR had appreciated 5% year-to-date from 4.16 to 4.38 on Tuesday.

HLIB Research stated that Evergreen, mirroring the sell-off in global markets in the past two weeks, had lost 11.8% in share price as of Tuesday from a 52-week high of 80 sen to 71 sen..

However, it believes that Evergreen will experience a rebound, with a target price of 75 sen to 87 sen, and advised investors to cut loss at 62 sen, seeing that its share price has closed above the critical support line.

It said that Evergreen’s average selling prices are still on a positive trend despite higher transport cost due to elevated oil prices and potential uptick bias in adhesive cost due to the Russia-Ukraine war.

HLIB Research also maintained that Evergreen is well positioned to overcome the prolonged bad weather and global macro events, riding on recovering demand in the panel board and furniture market. 

HLIB Research anticipates a robust financial year ended Dec 31, 2021 (FY21) to FY23 for Evergreen with a compound annual growth rate of earnings per share of 74%.