Timber counters gain on higher price cycle

The price rally will not be prolonged and is likely to be more thematic, says analyst

by ASILA JALIL / Pic by BLOOMBERG

TIMBER-RELATED stocks have attracted investors’ interest as potential gainers from the expected cyclical recovery in pandemic-impacted sectors and on higher commodity prices.

The price of timber and timber-related counters on foreign markets has risen significantly due to a sizeable demand expected from the fiscal spending planned in America and other countries, with the thematic now catching on with investors on Bursa Malaysia.

MIDF Amanah Investment Bank Bhd VP and head of research Imran Yassin Md Yusof said economic recovery optimism has helped push timber-related counters higher, supported by factors such as rotational play and abundance of liquidity in the market.

“Anticipated economic recovery could also play a major factor, especially in timber importing countries such as the US and China. Increasing demand from other countries would likely drive the timber industry throughout 2021,” he told The Malaysian Reserve yesterday.

He, however, said the price rally of the counters would not be prolonged and is likely to be more thematic.

He also said the rally seemed to play into the recent commodities prices surge at the moment, adding that it would likely last throughout the first half of this year.

Much like the steel and aluminium makers enjoying fresh inventors’ interest, timber-related counters such as WTK Holdings Bhd, Evergreen Fibreboard Bhd, Dominant Enterprise Bhd, Timberwell Bhd, Woodlandor Holdings Bhd and Golden Pharos Bhd have been trading higher the past three months. WTK Holdings’ shares have risen 31.8% or 14 sen in three months. It ended one sen lower to 58 sen yesterday, valuing the company at RM279.2 million.

The company saw its market capitalisation surged 35%, or RM72.46 million, to RM279.2 million from RM206.8 million for a three-month period from Feb 10.

Evergreen Fibreboards’ shares climbed to 47 sen yesterday from 41 sen for the same period.

The company was valued at RM393.7 million yesterday, up by 13.5% or RM46.9 million from RM346.8 million three months ago.

Dominant Enterprise saw its share price closing at 96 sen yesterday from 73 sen three months prior. Its market value increased by RM38.8 million during the period to RM159.5 million from RM120.6 million.

Similarly, Timberwell’s share price surged from 55 sen in February to close at 89 sen yesterday, up by 61.8.% or 34 sen. The company’s market capitalisation has increased from RM49 million in February to RM79.26 million yesterday.

The local furniture and packaging industry is well-positioned for a growth surge this year as furniture demand gets a trade diversion boost on the back of the US-China trade war.

Malaysia wooden furniture exports to the US jumped 38% yearon-year in 2019 to RM4.7 billion from RM3.4 billion, following orders diversion of US buyers to South-East Asian countries from China.

The US market has become Malaysia’s largest export market for timber and timber-related products for the second consecutive year since 2019 due to the US-China trade war.

Lumber — which is a key material for home building in the US — has become one of the most sought-after commodities in the past year as the price has reached record highs, according to news reports.

Lumber futures in the US were priced at around US$250 (RM1,028) per 1,000 board ft in March last year, according to Investing.com. Since then, the price has surged 448% and has gone over US$1,370.

The primary factor contributing to the increase in lumber prices had been the rising demand from home renovation projects, as the pandemic has pushed many to adapt to the stay-at-home lifestyle.