HOMERITZ CORP BHD

By HLIB Research Buy Target Price: RM1.18

HLIB Research said Homeritz Corp Bhd’s core profit after tax and minority interests (PATAMI) for the financial ended Aug 31, 2017 (FY17) came in within expectation, accounting for 98% of its full year forecast.

Homeritz declared a final dividend of 2.2 sen, bringing year to date dividend to 4.2 sen.

This translated to a dividend yield of 4.4%, HLIB said. The company’s fourth quarter ended Aug 31 revenue and core PATAMI rose by 16.9% and 48.3% from a year ago to RM39.7mil and RM6.7mil, respectively, mainly due to an increase in sales volume by 11% and the strengthening of the US dollar against the ringgit.

On a year to date basis, Homeritz’s FY17 core PATAMI increased by 6.4% to RM29.4mil, mainly due to the increase in sales volume by 3% and the strengthening of the US dollar against the ringgit by 4%.

HLIB said it remains positive on Homeritz as the company continues to improve cost efficiencies via effective trainings for the workers and continuously seeking for automation opportunities. In addition, it expected Homeritz to have a plentiful harvest next year from its effort in active exhibition participation this year.

Among the risks include strengthening of the ringgit against the US dollar, high raw material prices, especially leather and log costs, which account for 44% of production cost, and escalating labour costs, HLIB said.

The research house maintained its fore- casts earnings for FY18 and FY19 and expected FY20 core earnings forecast at RM36.8mil.

HLIB said it has maintained a “buy” call on Homeritz with target price of RM1.18 based on 11 times unchanged 2018 earnings per share of 10.7 sen. It said the company is still on expansion mode and stable growth in the global furniture market arising from the growing real estate industry and increasing number of global retail stores.