Evergreen Fibreboard

Evergreen Fibreboard’s (EFB) annualised earnings came in below our expectations,
straying 33% off our YTD earnings estimates. Despite that, after three quarters
during which MDF selling prices languished, the gradual improvement in the global
economy bolstered earnings in 2Q. Given the pick-up in orders and selling prices
on a growth in MDF demand, we maintain our earnings projections going forward.
On account of the positive outlook for its industry peers going into FY10, we are
rolling forward our valuation parameter to EFB’s FY10 EPS, tagged at a higher
Average Peers P/E of 9.1x. Thus we derive a higher TP of RM1.03 (previously at
RM0.38) and upgrade our recommendation to BUY from SELL.

Upgrade to BUY. The slew of government stimulus packages domestically and
worldwide is turning the tide for EFB. We expect more orders to flow in the upcoming
quarters. However, management only expects a swing in terms of better sales sometime
in mid-2010. Hence as we are now focusing on EFB’s FY10 performance, we are rolling
forward our valuation parameter for EFB to its FY10 EPS. Tagged on a higher Average
Peers P/E of 9.1x, we now derive a higher TP of RM1.03. Our recommendation for the
stock is now a BUY from a SELL previously.