Furniweb in focus

WHAT is happening to Furniweb Holdings Ltd, a 63%-owned subsidiary of PRG Holdings Bhd that is listed on the Stock Exchange of Hong Kong?

Earlier this week, property and construction firm PRG issued two filings to Bursa Malaysia with regard to Furniweb - the first announcement was related to Furniweb having issued a profit warning over a steep decline in its net profit for the nine months ended Sept 30, 2018.

In the second announcement, PRG said that Hong Kong regulators had cautioned Furniweb over the high concentration of shares in a small number of shareholders, as well as the recent surge in its share price.

Despite the profit warning, the stock is trading almost at its alltime high - HK$1.85 as of yesterday. This is a 440% surge from the closing price of 33.5 HK cents on Aug 28.

The huge surge could be partially due to Furniweb’s announcement on Oct 3 that PRG had disposed of 60.48 million shares, or 12% of the issued shares, for HK$30.24mil to independent third parties.

The disposal price was 50 cents per share, compared with the closing price of 80 cents on Oct 3.

On its profit warning announcement, Furniweb informed shareholders and potential investors that “there was a substantial decline in the group’s net profit of about 86.5% in the period as compared with that of the corresponding period in 2017”.

To be fair to yarn-maker Furniweb, it has been profitable over the last five years, although both profits and margins haven’t been exciting. Its past profits ranged between RM4mil and RM6mil with low single-digit margins.

Perhaps, poorer market conditions and a depreciating currency could really take a significant chunk off its earnings.

On its public shareholding, Hong Kong’s Securities and Futures Commission completed an enquiry saying that as at Oct 8, a total of 19 shareholders held 143.27 million shares or 28.43%.

Together with 317.52 million shares (63% of the issued shares) held by a substantial shareholder, this represented 91.43% of the issued shares as at Oct 8. As such, only 43.20 million shares or 8.57% was in the hands of other shareholders.

This would mean that the public float of Furniweb is extremely small. Until this issue is resolved, expect more wild swings in its share price.