Highly Correlated

In today’s posting, we will be exploring two Malaysian-listed stocks that have significant correlation with the movements in the Malaysian Ringgit – HeveaBoard and Poh Huat Resources. Are these stocks over or under valued with respect to the recent weakening in the Ringgit?

Company Background: HeveaBoard

HeveaBoard Berhad (“HeveaBoard”) was incorporated in 1993 as a private limited company under the name of HeveaBoard Sdn Bhd. The Company was converted into a public limited company in 2004 and assumed its present name, and was subsequently listed on the main board of Bursa Malaysia Securities Berhad in January 2005.

HeveaBoard and its subsidiaries manufacture, trade and distribute a wide range of particleboard and particleboard-based products. HeveaBoard takes the lead in the manufacturing of particleboard – a reconstituted wood panel derived from rubberwood residues, while its subsidiaries are involved in down stream particleboard based Ready-to-Assemble furniture manufacturing, trading and distribution of particleboard and wood panel related products. read more

Company Background: Poh Huat Resources

Poh Huat Resources Holdings Berhad is a Malaysia-based investment holding company. The Company is engaged in manufacturing furniture products. The Company operates through furniture industry segment. The Company operates in South Africa, Vietnam and Malaysia. The Company’s subsidiary, Poh Huat Furniture Industries (M) Sdn. Bhd., is engaged in the manufacture and sale of furniture, and investment holding. Its subsidiary, PHW Properties Sdn. Bhd., is a property developer and building contractor. Its subsidiary, Poh Huat International Sdn. Bhd., is an investment holding company. Its subsidiary, Poh Huat Furniture Industries Vietnam Joint Stock Company, is engaged in the processing and manufacturing of wooden household furniture. Its subsidiary, Poh Huat International (BVI) Limited, is an investment holding company. read more

Correlation: HeveaBoard

There is a significant statistical relationship between the share price of Heveaboard and movements in the USDMYR exchange as shown below:

hevea_2

As shown in the graph below, the current share price of HeveaBoard of RM1.50 is relatively close to the predicted value of RM1.57 (as per regression analysis):

hevea_1

Correlation: Poh Huat Resources

There is a significant statistical relationship between the share price of Poh Huat and movements in the USDMYR exchange as shown below:

Poh_2.png

As shown in the graph below, the current share price of Poh Huat of RM1.75 is relatively lower than the predicted value of RM1.95 (based on the regression analysis) but is within the 95%-confidence interval of RM1.65 – Rm2.25 per share.

Scenario Analysis – HeveaBoard & Poh Huat Resources

A simple scenario analysis based the range of USDMYR exchange rates is shown below:Slide1.PNG

At current USDMYR exchange rate of 4.48, there may be potential trading opportunity if Hevea trades closer to RM1.30-1.35 (lower band of the 95%- confidence interval) whilst the trading range of RM1.61-RM1.67 (i.e lower band) per share may be a possible trading opportunity for Poh Huat Resources.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES OR RELATED INSTRUMENTS MENTIONED ABOVE.

Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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