Poh Huat to surpass full year financial estimates

KUCHING: Poh Huat Resources Holdings Bhd (Poh Huat) is likely to surpass full year estimates as its ninth month financial year 2016 (9MFY16) net profit of RM28 million accounted for 58.3 per cent of it’s full year estimates.

This was on the back of its sales being historically stronger in the fourth quarter ( 4Q) as demands picks up before year end festivities.

The research arm of TA securities Holdings Bhd ( TA Securities) noted that when compared year on year (y-o-y), Poh Huat’s 9MFY16 net profit had jumped by 19.8 per cent to RM28 million as revenue increased by 22.1 per cent to RM383.2 million.

These figures come from both its Malaysian and Vietnamese operations.

Explanations for these dramatic increases can be attributed to the successful launch of several ranges of office furniture during the Malaysian furniture exhibition in March, and increased shipment and sales of home furniture to the US.

“However, profit before tax (PBT) margin recorded in 3QFY16 was at a lower 9.7 per cent compared with 10.8 per cent achieved a year ago as margin for the export sales denominated in USD normalised after sustained weakening of the ringgit,” the research arm noted.

In Poh Huat’s Vietnam operations, margin for operation was slightly lower due to the temporary shift in the composition of mid- range products, which would be in line with US consumer preferences.

When compared quarter over quarter (q-o-q), Poh Huat’s net profit surged 18 per cent and 156.7 per cent respectively due to their seasonality.

“The increase in net profit was due mainly to higher utilisation rates of its plants in the reporting quarter as in the immediate preceding quarter both of its plants in Malaysia and Vietnam were off during Chinese New Year holiday, which fell in the month of February,” explained the research arm.

Poh Huat’s future outlook seems promising as the group’s exportation to the US seems to be remaining in the uptrend since hitting the bottom in early 2011.

As such, the research arm maintains that Pohuat’s earnings will remain strong in the foreseeable future.

Additionally, as the group is expanding into Australia, it may take some time to establish their brand and gain market acceptance. This move is expected to help provide a growth potential which way help reduce over reliance on the North America market.

As such, the research has decided to revise their FY17 and FY18 ringgit to US dollar assumptions to 4.125 and 4.10 respectively.

“We raise our FY17 and FY18 earnings forecasts by 1.3 per “ent and 0.8 per cent respectively.

Following this revision, the research arm has also decided to raise Pohuat target price (TP) a little to RM2.05 from RM2.08 which is based on an unchanged 10 foldFY17 earnings per shjare.

“We reiterate our ‘buy’ call on Poh Huat.”