POH HUAT RESOURCES HOLDINGS BHD

By Affin Hwang Capital Research Buy (maintained)

Target price: RM2.48

POH Huat Resources Holdings Bhd’s core net profit of RM58.2mil in the financial year of 2017 (FY17) came in above its expectation but within consensus, according to Affin Hwang Capital Research.

The full-year core net profit, which rose by 15% year-on-year (y-o-y), accounted for 109% and 101% of the research house’s and the street’s forecasts respectively.

The significant growth in core net profit was mainly as a result of Poh Huat’s higher-than-expected contribution from the Malaysian operations.

The furniture maker’s top line for the financial year also grew by 14.8% y-o-y to RM614.3mil, driven by higher shipping volume for both Malaysian and Vietnamese operations due to the continued strong orders from the United States and North American importers.

The strong shipment was also attributable to the successful launch of several ranges of new models including the panel-based bedroom sets.

However, Affin Hwang Capital Research said that Poh Huat’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin weakened in FY17 by 0.2% points y-o-y to 12.7%.

This was primarily attributed to the increase in raw-material costs, particularly for wood, hardware and finishing materials.

“We expect Poh Huat to continue to benefit from higher furniture sales to the United States, its largest export market. We like the stock as we believe earnings will continue to grow driven by its rising office and home furniture sales trend.

“Given the stronger-than-expected FY17 results, we have raised our FY18-19 core earnings per share forecast by 2% to 4%, mainly to account for higher contribution from the Malaysian operations.

“We continue to like Poh Huat as we opine that growth prospects from its existing business markets and expansion into new markets like Australia offer decent earnings catalysts,” said the research house in a note.

Affin Hwang Capital Research reiterated its “buy” call on Poh Huat, but raised the target price to RM2.48 from RM2.39 previously.