KUALA LUMPUR (June 23): Hong Leong Investment Bank (HLIB) Research has raised its fair value (FV) for Focus Lumber Bhd (FLB) to RM2.26 (from RM1.98) and said despite the shipment delay due to US port congestion, FLB’s 1QFY22 results were above house expectations.
In a note on Thursday (June 23), the research house said it believes FLB will register stronger q-o-q earnings in 2Q in anticipation of higher realised plywood prices to offset rising input costs.
HLIB, which does not have a rating for FLB, said FLB’s main export market, the US (about 70% to 80% of its revenue), is experiencing a slowdown in housing starts and RV sales (both of which use plywood as their inputs) amid an interest rate upcycle.
“We believe the impact on FLB will be moderate in the near to medium term as the current tight plywood supply and worsening supply chain continue to incentivise US distributors to place orders in advance to build up inventory.
“On top of the bread-and-butter US market, the Russian-Ukraine war has opened up a new window for FLB to penetrate into the EU markets.
“We raise our FY22-23 earnings forecasts by 21% and 11% respectively and subsequently raise our FV to RM2.26 based on 8.6x FY23 EPS of 26.6 sen,” it said.