Saturday, 21 November 2015

Hevea: From Debt-Ridden To Net Cash

Heveaboard FY15Q3 Financial Result

HEVEA FY15Q3 FY15Q2 FY15Q1 FY14Q4 FY14Q3
Revenue 123.8 111.4 116.4 115.1 95.7
Gross Profit 30.5 23.0 22.0 20.0 13.8
Gross% 24.6 20.6 18.9 17.4 14.4
PBT 21.4 16.5 14.6 9.0 6.3
PBT% 17.3 14.8 12.5 7.8 6.6
PATAMI 18.1 16.0 14.0 8.9 5.8

PB Manu Rev 59.9 51.3 47.6 51.1 46.4
PB Manu PBT 11.0 10.9 7.6 1.6 4.1
RTA Manu Rev 59.9 56.5 64.4 59.7 44.5
RTA Manu PBT 10.2 5.6 6.7 7.5 1.9
PB Trade Rev 0.5 0.2 0.2 0.2 0.02
PB Trade PBT 0.11 0.02 0.1 0.05 0.04
RTA Trade Rev 3.5 3.4 4.3 4.1 4.7
RTA Trade PBT 0.03 0.02 0.1 -0.08 0.2

Total Equity 320.8 301.1 284.7 270.7 261.8
Total Assets 441.6 416.8 412.7 412.5 414.5
Trade Receivables 47.7 52.3 44.7 53.5 49.2
Inventories 57.9 62.7 64.5 60.7 62.2
Cash-OD 74.9 48.3 44.6 35.6 35.3

Total Liabilities 120.7 115.6 128.0 141.9 152.7
Trade Payables 25.9 26.3 26.7 27.4 37.9
ST Borrowings 32.4 29.7 25.0 27.4 23.2
LT Borrowings 29.8 32.6 44.0 41.7 64.6

Net Cash Flow 39.3 12.7 8.9 8.1 7.8
Operation 84.7 44.5 27.0 50.4 36.6
PPE Depreciation 19.4 12.9 6.4 26.1 19.6
Investment -8.9 -2.3 -3.5 -10.7 -6.3
PPE purchase 8.8 2.3 3.5 10.7 6.3
Financing -36.6 -29.4 -14.6 -31.6 -22.4
FCF 75.9 42.2 23.5 39.7 30.3

Dividend paid 4.0 1.5 0.0 1.9 1.9

EPS 4.63 15.82 14.05 8.96 5.85
NAS 0.82 2.97 2.86 2.72 2.63
Net D/E Ratio Net cash 0.05 0.09 0.12 0.20

Hevea's remarkable rise continues with its best ever quarterly result in FY15Q3.

Its revenue and PATAMI of FY15Q3 increase 11% and 13% respectively compared QoQ.

This better result is contributed by improvement in both of its particleboard & Ready-To-Assemble (RTA) products manufacturing.

Hevea has gradually shifted its particleboard product range from conventional to higher value low-emission eco-friendly products which serve higher-tier customers.

This has resulted in higher revenue and profit margin for the company.

It has also invested heavily on automation in its RTA products manufacturing to improve operation efficiency.

This might have started to reap the reward as we can see a jump in the PBT margin in this segment in current quarter.

Hevea's cost are mainly in MYR and about 90% of its sales are denominated in USD. So it should benefit from stronger USD against MYR.

However, it actually registered a net forex loss of RM1.56mil in this quarter due to USD denominated loan.

Its cash flow remain robust anyway and so its balance sheet strengthens further.

It finally turns into a net cash company before year 2016.

As a result, it continues to pay second interim dividend of 0.5sen for FY15, after a first interim dividend of 0.5sen being paid after the share split.

Though the total 1sen dividend so far is merely 13% payout from 1H15's PATAMI, I believe that higher dividend or may be a special dividend will be paid next year.

I also believe that Hevea will be another company that pays quarterly dividend.

I guess Hevea should be able to achieve RM65mil in PATAMI for its FY15.

Base on current outstanding shares of 424mil, projected EPS will be 15.3sen.

Fully diluted (144mil warrants expired in 2020) projected EPS for FY15 will be lower at 11.4sen.

Hevea does not have a fixed dividend policy yet I think.

If it decides to pay 30% as dividend, then it will be 4.5sen for FY15, with a possible yield of around 3% at current share price of RM1.47.

Can Hevea continue to grow?

There are rumour that it is looking to acquire SHH Resource which is a solid wood furniture manufacturer.

I don't know what will be the outcome but it's clear that Hevea's management is trying to grow the company inorganically. 

It will also venture into the retail furniture market by producing and selling eco-friendly (low formaldehyde emission) children furniture.

This new product is expected to be available in local Malaysia market by 2015 year end before exported to regional markets.

I expect MYR to stay flat or rebound against USD in 2016.

If it stays flat, it should benefit Hevea as USD loan will be pared down in stages.

If it rebound modestly, I think it should not affect Hevea too much as it is still losing on strong USD now.

Anyway, I think Hevea has a good future so I will continue to hold its shares even though only a little.


  1. Hi BD, can I know how you calculate the Net D/E ratio, i use total debt/total equity, unable to get FY15Q2 0.05 ratio

    1. Different people may use different calculation. For me, I use only bank borrowings: [total short term + long term bank borrowings] - [cash or equivalents + short term investment], dividend by equity attributable to shareholders.

  2. BD, do you able to separate out how much hevea gross profit was contributed by strengthen USD compared to previous year same quarter. Need to know if assume exchange same rate, will hevea remain the momentum to grow in revenue and profit in future. I have no way to get this info from the quarter report.

    1. I think it's not possible to know accurately how much increase in revenue/gross profit margin were contributed by favourable exchange rate. For me I just look at how the PBT was arrived at in note #B5.

    2. In that case how to know the stronger revenue and pbt were boosted by increasing of sale volume but not exchange rate? You still hold it because of its growth momentum or just its current valuation is still cheap?

    3. Hard to tell about its revenue... I hold it because of its robust cash flow, and its high quality products which are not easy for competitors to follow (according to analyst report).