Focus Lumber hits all-time high on stronger US dollar

by **Cals** Tue 22 Sep 2015, 23:21

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[size=28]Focus Lumber hits all-time high on stronger US dollar

By Gho Chee Yuan / theedgemarkets.com | September 22, 2015 : 4:13 PM MYT

KUALA LUMPUR (Sept 22): Focus Lumber Bhd ([You must be registered and logged in to see this image.] Valuation: 2.40, Fundamental: 1.95)'s shares rose as much as 7.1% to an all-time high of RM1.81 today as the plywood manufacturer is seen as a beneficiary of the strong US dollar.

As at 3.35pm, the ringgit fell 0.27% against the greenback to 4.2835, after touching a low of 4.2948.

At 3.48pm, the stock was traded up 7 sen or 4.14% to RM1.76. Some 2.98 million shares were seen traded between RM1.68 and RM1.81 during the day. At RM1.79, Focus Lumber's market capitalisation stands at RM184.73 million.

In a note to clients dated Sept 9, HLIB Research said Focus Lumber is a net beneficiary of a strong US dollar as most of its export revenue is sold in US dollars, while production cost is settled in ringgit.

HLIB Research analyst Nick Foo Mun Pang said the group's bread and butter product, plywood, is commonly used in various industries, such as home decorating, construction and furniture industries.

"Recreational vehicle (RV) market in the US is the group's main growth driver, accounting for 64.9% of total revenue in FY14," he said.

He expects the US RV market to grow on the back of recovering US economy.

"We opined that demand for the group's plywood will increase in tandem. According to the Recreation Vehicle Industry Association (RVIA), RV shipments in 2015 are expected to reach approximately 365,000 units, which would be the highest total since 2006," Foo said.

Given prospects of the strong dollar, lower commodities prices and lingering domestic concerns, he said Focus Lumber is expected to continue enjoying translation gain from a strong greenback.

"Having said that, any unfavourable fluctuations would also equally erode the group's profitability," he added.

Based on its Annual Report 2014, 97.8% of the group's revenue was derived from exports sales, with the US market accounting for 65.33%.

Aside from the US, the group also exports to Asian countries such as South Korea, Taiwan, India, China, Hong Kong and Japan. The Asian market contributed 32.2% of the group's revenue in the financial year ended Dec 31, 2014 (FY14).

For the second quarter ended June 30, 2015 (2QFY15), Focus Lumber's net profit grew 126.76% year-on-year to RM8.05 million from RM3.55 million a year ago. Revenue also expanded by 34.47% to RM50.13 million from RM37.28 million in 2QFY14.

(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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