Stock With Momentum: Focus Lumber

by **Cals** Tue 08 Sep 2015, 21:01

Stock With Momentum: Focus Lumber

By Asia Analytica / digitaledge Daily | September 8, 2015 : 10:43 AM MYT
Focus Lumber (Fundamental: 1.95/3, Valuation: 2.4/3) was first featured as InsiderAsia’s Stock of the Day on December 11, 2014 at RM1.04. The stock has since risen 67.0% to close at a one-year high of RM1.74 yesterday.
The Sabah-based manufacturer of plywood, veneer and laminated veneer lumber is a beneficiary of the weaker ringgit. Year-to-date, the ringgit has depreciated by 19.3% against the US dollar. The company derived over 97% of its sales from export markets — 66.4% of which went to the US.
For 1H2015, net profit expanded by an outsized 48.7% to RM11.4 million on the back of a 6.8% increase in revenue to RM80.2 million. The increase was mainly attributed to increased sales volume as well as higher average selling price and profit margin from the stronger US dollar.
Focus Lumber has been steadily growing for the past four years. 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.
The company is backed by a debt-free balance sheet, with net cash totalling RM84.9 million at end-June, up from RM36.4 million in 2011. This translates to net cash per share of 82 sen, or almost 50% of its market capitalisation.
Dividends have also been on an uptrend, rising from 6 sen per share in 2011-2012 to 8 sen per share in 2013-2014, which translates to an attractive yield of 4.8%. For 2015, Focus Lumber has paid an interim dividend of 5 sen per share in August.
The stock trades at a trailing 12-month P/E of 8.62 times and 1.20 times book.
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This article first appeared in digitaledge Daily, on September 8, 2015.