SHH (7412) - SHH - A Leap Above

SHH (7412) - SHH - A Leap Above

SHH 新兴发资源 7412 SHH RESOURCES HOLDINGS BHD

22 August 2014

The global equity market continue to inch higher as the DJIA had challenge above the 17000 mark as of now, sitting at 17048 (+69.60) after the recent FOMC meeting had gave institution a confidence that the Feds will continue to maintain a loose monetary policy that is much needed to continue on the recovery note that the US is having now. Based on the bullish Q2 economy data, the loose monetary policy by maintaining a low interest rate, the global equity market is almost clear of all potholes, except for the geo-political tension in the Gaza, Syria, Iraq and Ukraine that could burst into a more serious note.

With the robust economy data from the West, the local furniture business had been recovering and seeing a growth as well with the rising demand from the West. While most had risen above their net tangible asset, SHH is definitely something that is worth a look at.

Let's have a quick look at the current price movement of SHH.

SHH had been consolidating at the price range of RM 0.95 for a period of approximately 3 months. The consolidation had seemingly seen a saturation in the price range and will be looking to challenge into higher ground in the coming days, especially with a higher anticipation that a better report in the coming FYE 2014 result which will be out soon in the end of August. SHH will be looking to challenge a small resistance at RM 1.00, while breaking above RM 1.10 will mark SHH into a uncharted territory, which might be able to see it testing RM 1.20 to RM 1.50 in the coming days.


SHH - A Booming Front

SHH Resources Holdings Berhad is engaged in the manufacturing of wooden furniture, including the kiln drying and treatment of wood used in the manufacturing process. Most of the wooden furniture that SHH manufacture is exported to the United States.

Furniture company had been encountering a robust growth stage after the recovery of the US economy. Furniture company started to pick up in the end of 2013 with more encouraging order in the 1H of 2014. The furniture craze had been strong and is one of the dominating topic in 2014.

A quick look up on the following furniture or furniture related company.

1.) Latitude Tree Holdings Berhad
NTA: RM 3.05

2. Poh Huat Resources Holdings Berhad
NTA: 1.55

3. Heveaboard BerhadNTA: 2.63

4. Homeritz Corporation Berhad
NTA: RM 0.44

5. Eurosp
NTA 1.07

While most of the company had been trading near/above their NTA valuation (except for Hevea), SHH might be still a comparatively good furniture company that had a great potential in the coming up days ahead. Let's have a quick look at their latest 3Q FYE 2014 result.

Based on the 3Q cumulative outlook, SHH had saw a significant increased in it's revenue, with a 13 cents EPS and a NTA of RM 1.47. SHH had also been displaying a strong steady foothold of cash that had been increasing in quite a drastic manner with decreasing debts. SHH had saw more than 100% of increase in their cash level from 31/12/2012 to 31/03/2014. Currently, SHH is sitting on a cash pile of RM 23million, equivalent of RM 0.46 cash value per share.

SHH better margin had been contributed by it's in-house processing of the timbers and woods, which had been a definite boost for the company operation profits.

Coming up catalyst

SHH had been mainly exporting their products to the US. While their order books had not return into the glorious days before the then 1997 Asian Financial Crisis, the current bullish and robust economy in US had been in an encouraging note as SHH will be looking to see a break through in the coming days after their order had picked up in a drastic manner in the 1H of 2014. According to industry sources, SHH had seen strong order and sitting on a rather huge unbilled sales that will be recognized in the 4Q of 2014. SHH might be looking to see their revenue breaking above RM 30m for 4Q 2014, and registering their FYE 2014 revenue above RM 100m. SHH might be looking to chalk above an EPS of 16 cents for FYE 2014, translate to a value of RM 1.28 per share if traded at a skeptical PER of x8.

I believe SHH will be an interesting company to be invested in based on

- Increasing cash level on the past 6 quarters

- Sitting on RM 23 million cash pile, or RM 0.46 cash per share (Based on 49,997,500 shares)

- Trading at a 35% from it's NTA of RM 1.45, while most of it's peer had traded above or near to their NTA, with Homeritz traded at 80% above it's NTA of RM 0.44

- Encouraging economy from the US as US undergo a bullish state of economy after Feds commitment to keep the interest rate low.

- Strong coming 4Q 2014 with stronger revenue and recognizing unbilled sales done in 1H 2014.

- Undervalued land & properties with properties valuation done back at 1994 to 1996.

SHH will be looking to see challenge above RM 1.00 in a confident manner. A quick short term outlook will place SHH at RM 1.10, while a longer term outlook will see SHH putting a foothold at around RM 1.30 to RM 1.40 in the coming days.

Bone's short term TP: RM 1.10

Cheers and have a nice day

Regards,

Bone

 http://bonescythe.blogspot.com