Home improvements and working environment upgrades have boosted the demand for furniture, says analyst
by SHAHEERA AZNAM SHAH / pic credit: pohhuat.com
SHARES of Poh Huat Resources Holdings Bhd benefitted from the spike in demand for office furniture as companies and business owners globally reconfigure their work setting.
Its share price rose 21% within last month, trading between RM1.30 and RM1.70, and increased 13.1% in the 52-week period low of 65 sen.
Malacca Securities Sdn Bhd head of research Loui Low said as the manufacturing activities resumed, coupled with the exports and imports, furniture manufacturers are expected to begin clearing their backlog orders received during the Movement Control Order (MCO) period.
“During the MCO period, a lot of orders came in for furniture makers, particularly from the US, as the country moves away from China due to its trade diversion policy.
“The home improvements and working environment upgrades have boosted the demand for furniture as people become more comfortable to work from home.
“Businesses will invest in this reconfiguration for the sake of comfort, and it has benefitted Malaysian furniture makers,” he old The Malaysian Reserve (TMR).
In August, Malaysia’s trade with the US rose 8.2% to RM15.63 billion from last year, representing 10.8% of the country’s overall trade, driven mainly by the exports of manufactured goods.
Low said Poh Huat Resources performed better compared to other local furniture makers backed by its healthy dividend history and the group’s market exposure.
“From what we have gathered from companies in the furniture making industry, orders have increased more than expected during the pandemic and this has certainly helped boost their earnings. Their production capacity has probably maxed up.
“Poh Huat Resources’ records show that it is a solid company that pays a healthy dividend. So, it is on a better footing compared to other players although their demands have been in the rise as well,” it said.
The company is exporting home and office furniture to more than 30 countries. The US and Canada are its main markets, comprising about 90% of the group’s total sales combined.
The remaining 10% of its markets are the UK, Singapore, the Middle East and Malaysia. Low said Poh Huat Resources’ share price could reach the range of RM1.80 to RM1.86 in the next three to six months, based on the research house’s technical analysis.
“The share price is in an upward trending mode. I wouldn’t rule out the possibility of the share price to go higher. From a technical analysis perspective, we are looking an increase to RM1.80 or RM1.86 within the next three to six months,” he said.
For its financial year 2019 (FY19), the group paid RM13.29 million of dividends compared to RM17.55 million recorded in FY18.
TA Securities Holdings Bhd analyst Chan Mun Chun said the furniture maker’s financial performance in its last quarter ended October 2020 would be its strongest quarter compared to the previous year before the margin normalised in its FY21.
“The outlook now is getting better compared to the first half as the export and import activities resumed and they could deliver the sales orders.
“After the border opened, companies have to do some stock up, which contributed to the spike in demand as manufacturers are catching up on all these backlog orders. Thus, we can expect the next quarter result to be quite strong,” he told TMR.
TA Securities recommended a ‘Buy’ call for Poh Huat Resources, with a 28.3% increase in target price to RM1.77.
Poh Huat Resources’ revenue declined 19.4% in the third quarter to RM132.8 million as production and shipment in Malaysia and Vietnam were affected by lower production levels and demand due to the pandemic.
However, its net profit for the quarter slightly up 12.3% to RM11.53 million, mainly due to the lower selling expenses incurred and more efficient use of raw materials.
Poh Huat Resources’ share price fell 3.53% or six sen yesterday to RM1.64, giving it a market capitalisation of RM427.29 million.