Monday 22 Apr 2024
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KUALA LUMPUR (Jan 12): HeveaBoard Bhd, which has seen its share price fall 15% over the past week on "bloggers attacks", rebounded 6.16% today after its management and an analyst said the allegations were non-fundamental and frivolous.

The investor blog had carried three negative allegations against HeveaBoard in the past week. Besides alleging that a civil suit has been filed against the company's managing director over the non-payment of dividends, the blog had claimed that 700 of the company's containers of particleboard were stuck in Korea due to non-conformance to quality standards, and that there were discrepancies in HeveaBoard's inter-company loan.

These allegations had resulted in HeveaBoard's shares slumping 15% to RM1.46 on Monday compared to its share price of about RM1.73 a week ago on Jan 5. However, the counter recouped some losses today and rose 6.16% or 9 sen to close at RM1.55.

According to CIMB Research, the company's managing director Yoong Hau Chun had explained via a conference call that a civil suit was indeed instituted by HeveaWood Industries' (HW) (HeveaBoard's largest shareholder with a 27% stake) minority shareholders against the Yoong family for the non-payment of dividends at HW.

However, Hau Chun said HW was not in a position to pay dividends from 2009 to 2012 as HeveaBoard's financials were stretched following the collapse in the particleboard industry. CIMB also wrote that the High Court have decided in favour of the defendant in the suit.

The management had also dismissed the allegation that its containers were held up by Korean customs due to non-conformance to quality standards as "untrue".

"Korea had changed its orders from E2 boards to E1 boards. As Korean E1 testing standards differed slightly, HeveaBoard delayed shipment to Korea pending clarification of its new testing standards. This issue has since been resolved," CIMB noted.

On the discrepancy in its inter-company loan, CIMB noted that the management said HW had made other inter-company loans to other related parties in addition to HeveaBoard and hence, the amounts would differ.

"All of HeveaBoard's debts will be repaid by mid-2016, according to management," said CIMB.

The allegation was that HeveaBoard had "beautified" its accounts to hide an €890,000 inter-company loan made by HW to HeveaBoard in 2005, quoting discrepancies between amounts owed by related parties to HW versus the amount owing by HeveaBoard to related parties.

As such, CIMB Research urged investors to stick to HeveaBoard's fundamentals, and maintained its "add" call on the counter.

"We felt that management addressed the issues very well and sensed that institutional investors were comfortable with the explanations," CIMB research said and urged investors not to be distracted by these non-fundamental and frivolous allegations.

"In our view, any share price correction is an excellent opportunity to bottom fish as our earnings forecasts are conservative (RM/USD of 4.0 versus current spot rate of 4.4). A 1% depreciation of the ringgit increases HeveaBoard's EPS (earnings-per-share) by 7.5%," it added.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)


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