LEESK (8079) - Riding on the Surge

LEESK (8079) - Riding on the Surge 

Wednesday, 18 June 2014

The global market continue to see bullishness in an overall manner as the US and European Bank continue to adapt to the loose monetary policy in order to encourage more market activities as US and Europe continues into the journey of recovery in their market. While there are still some global tension arising from the likes of Russian-Ukraine and US-Iraq conflicts, the situations might be able to go into an overblown situation from the media to spread fear into the market. In a local outlook, the KLSE market volume continues to see lower participation as the trend continue with the small capital market during this World Cup season.

However, despite the mixed signal from the market, it had came to my attention on Lee Swee Kiat Group (LEESK - 8079) on their current price and coming up prospects.

Let's have a quick look at LEESK

In a quick outlook, LEESK had been seen consolidating at the range of RM 0.15 to RM 0.17 for the past 5 months. A more significant volume on 12th June 2014 with more than 10m of shares changed hand had earmarked the urge of LEESK in pushing forward and breaking up towards RM 0.20 in the coming days. LEESK will be seeing another huge large volume spike in the coming day that will easily break above RM 0.17.


LEESK - A Delayed Catalyst

LEESK had been primarily involved in foam and mattress related products, which is engaged in the manufacturing, trading and distribution of mattresses, bedding accessories, laminated foam, polyurethane foam, natural latex foam and other related products. LEESK distributes its latex foam products under the brand name of Napure and beddings under the brand name of Tempur and Englander. Besides that, LEESK also involves in sofa and furniture under the brand of Calia, Meta and Gautier.

While LEESK might be just some other ordinary company that is doing their routine activities, what could be coming up for LEESK.

Most of LEESK revenue comes from the local market. As of 2013, the revenue from local market consist of almost 70% of the total revenue, while the next is US and Europe. While the 2H of 2013 and 1H of 2014 had been very much bullish for most of the furniture company like Homeritze, Latitude, PoHuat, SWSCAP and the recent one being SYF,  LEESK is a prime target that had been crippling in a quieter note as they are looking to perform greatly in 2014 with a large unbilled sales in hand and also the growing demand.

LEESK is looking to see their revenue breaking above RM100 million as they prepare to put in more focus on the overseas market, particularly in the recovering market of US and Europe. The huge export market to the US and Europe had been always the boost factor for most of the furniture company in Malaysia.

Beside focusing more on the foreign market, the local market will also see more demand in the coming days, especially in the 2H of 2014 as many of the highrise projects around Klang Valley will be seeing a lot of unit handovers soon, which will be easily translating to a huge demand spike in both the mattress/bed and furniture sector. 2H 2014 will at least see another 50,000 of new homes in Klang Valley being ready to be handled over to their respective owner


With 167.8m shares issued and at the price of RM 0.16, the market capitalization for LEESK is just a merely RM26.85m.

LEESK had 2 properties under their belt that is worth a total of approx RM 24 million. Not including the machinery and business which might be looking for another RM20 to RM30 million, the current price for LEESK had been definitely undervalued.

While the group current financial position is still nothing big to brag about, however, they are trying to reduce their debt level significantly in order to put the group in a stronger position in the coming days ahead.


LEESK could be a good company to be invested in due to:
- Bullish local demand for mattress/bedding and furniture in the 2H of 2014 as more highrise projects are looking to handover their units to the owner.
- Bullish economy outlook in the US and Europe as both of the continents are experiencing an economy recovery at it's strongest point of time.
- Undervalued company that could be trading in more than 50% discount at the current price of RM 0.16 from it's assets and business. LEESK can be easily worth more than RM50m based on it's assets and business.
- Still a laggard to move in the furniture industry, compared to movers like Homeritz, Latitude, Pohuat and SYF.
- Company direction to focus more on foreign market sales, as well as local sales. LEESK is aiming to see revenue breaching RM100m for FYE 2014.


LEESK could be a good counter to be invested or traded in based on it's potential growth in the coming days ahead. A short term outlook will be seeing LEESK challenging RM 0.20, while a longer term will suggest RM 0.25 to RM 0.30 as LEESK starts to deliver in their quarterly results.

Bone's short term TP: RM 0.20

Cheers and have a nice day

Regards,
Bone

http://bonescythe.blogspot.com