05 May 2012

HeveaBoard Berhad (Hevea, 5095) : The Potential of China Market and its Operation Segments

In the previous post, we have study some background information of HeveaBoard Berhad (Hevea, 5095). But two questions haven't been discussed, that are:
1. How are the profits of Particleboard manufacturing sector and Ready to Assemble (“RTA”) furniture sector, and which one has better profitability?
2. Is it significant for HeveaBoard to export 50% of its particle board to China market? These two questions will be discussed further in the coming post.

Therefore, in this post, we will step-by-step discuss two of these questions?

1. From the fourth quarter quarter report of Hevea, Segmental Reporting, as stated below:

We can see that the manufacturing of Particleboards increased significantly in financial year 2010 (19.9million) from 2009 (8.8million), but turned to negative at 2011 (-1.7million). The manufacturing of RTA, on the other hand, drops constantly from 2009 (27.3million), 2010(8.0million) to 2011 (5.1million).
(Note: since the profits /loses from trading segments are less than 1 million, I simply ignore them in this study)

Based on these data, apparently the Hevea did not done well in 2011 compared to 2010 and 2009. However, if we further investigate the cash flow statement of Heveaboard, different story is found. (This is out of the topic today and will not be discussed in this post)

Next, from the geographical information of Hevea below (source: Annual Report 2010):
It is found that the export revenue to China was increased from 6.7million (2009) to 34.7million (2010). What is the revenue to China in 2010, the answer can be found in the coming annual report. However, it is worthy to highlight that 34.7million only around 10% of the total export revenue of HeveaBoard. In other words, in order to achive the aim of directors / CEO, time is needed to realize this mission. Therefore, what I can see is a grow of profit in Hevea in the future after increase the exporting value from other countries to China for premium price and better profit margin.

In the next post, let's investigate the past performance of HeveaBoard in 2011, so that we can determine whether Hevea is undervalued or overvalued now?

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Written by: Xaivier Chia

P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.


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