POH HUAT RE­SOURCES HOLD­INGS BHD

The Star Malaysia - StarBiz - - Analyst Reports -

By Af­fin Hwang Cap­i­tal Buy (main­tained) Tar­get price: RM1.71

THE on­go­ing trade dis­pute be­tween the US and China is mak­ing Malaysian fur­ni­ture man­u­fac­tur­ers more com­pet­i­tive com­pared to those in China.

Poh Huat stands to ben­e­fit from this as it has good re­la­tion­ships with US buy­ers, which make up an es­ti­mated 90% of sales.

Poh Huat’s cur­rent for­ward or­ders runup to March to April 2019.

The group has been up­dat­ing and ad­just­ing its prod­uct mix, mainly to meet the change in con­sumer pref­er­ences to­wards the mid­dle and af­ford­able prod­ucts from high-end prod­ucts pre­vi­ously.

On top of that, at the Viet­nam op­er­a­tions, where com­pe­ti­tion is in­tense due to the ris­ing num­ber of fur­ni­ture mak­ers, Poh Huat has been try­ing to in­tro­duce more unique and dif­fer­en­ti­ated fur­ni­ture prod­ucts that other fur­ni­ture mak­ers are not able to copy, and which is help­ing to keep or­ders re­silient.

Cur­rently, the group is in talks with an Aus­tralian com­pany that sells fur­ni­ture prod­ucts on­line. The con­tri­bu­tion from this ven­ture is likely to be small, nev­er­the­less, if Poh Huat man­ages to pur­chase the Aus­tralian com­pany, this could be the group’s first foray in tap­ping the Aus­tralian fur­ni­ture mar­ket.

“We lift our fi­nan­cial year 2019 (FY19) and FY20 core earn­ings for Poh Huat by 4.5% and 3.4%, mainly due to stronger US de­mand, but partly off­set by ris­ing pro­duc­tion costs from higher raw ma­te­rial and labour costs.

“We reaf­firm our buy call on Poh Huat and lift our 12-month tar­get price to RM1.71 from RM1.64, based on a price-earn­ings ra­tio of 7.2 times ap­plied to our 2019 core earn­ings per share,” it said.

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