Highlights

Poh Huat - Capacity Expansion to Drive Earnings

Date: 05/10/2020

Source  :  AffinHwang
Stock  :  POHUAT       Price Target  :  1.96      |      Price Call  :  BUY
        Last Price  :  1.59      |      Upside/Downside  :  +0.37 (23.27%)
 


  • Poh Huat’s furniture orders are currently filled until February 2021, underpinned by a strong pick-up in demand from the US market.
  • Noting the recent run-up in the share price, we believe that there could still be upside as management guided capacity expansion in FY21
  • We lift our earnings estimates by 5.5-34% for FY20-22E, mainly to factor in a better-than-expected demand recovery as well as the guided expansion in capacity. We also revise our TP higher at RM1.96 based on an unchanged fully diluted CY21E PER of 8x.

Healthy Furniture Demand – Orders Up to February 2021

We recently hosted an investor meeting with Poh Huat. Management guided that monthly sales in August had reached RM70m (+20% of FY2019 average of RM58.4m). Currently, the order book is for deliveries up to February 2021. We believe the pick-up in demand could be due to seasonally stronger year-end demand due to festivities. Strong inventory restocking activity was also observed from its US customer as the company was surprised by the optimism in the home and furnishing market post the COVID-19 lockdown.

Capacity to Potentially Expand by 30% by FY22

In anticipation of stronger demand coming from the US, Poh Huat is allocating about RM25-30m in FY21 for capacity expansion in its Malaysian operation. Including simultaneous improvement in automation in other plants, total capacity could potentially increase by 30% in FY22.

8MCY20 Malaysia Furniture Exports to the US Jumped 64% Yoy

According to Malaysia’s External Trade Statistics (METS), Malaysia furniture exports stood at RM8bn for 8MCY20 (+9.6% yoy) as compared to RM7.3bn recorded in 8MCY19. The increase in exports was mainly to the US market, where exports rose strongly to RM4.7bn in 8MCY20 (+64% yoy). We expect demand from the US to remain healthy, supported by trade diversion and strong new and existing home sales data in the US, which hit a 13-year high in August 2020, reaching 1m (+43.2% yoy) and 6m (10.4% yoy). Hence, we believe Poh Huat’s earnings could potentially fare better due to its larger exposure to the US market (90% of Poh Huat’s FY19 revenue was from North America).

Source: Affin Hwang Research - 5 Oct 2020

Share this
Labels: POHUAT

Related Stocks

Chart Stock Name Last Change Volume 
POHUAT 1.59 -0.02 (1.24%) 170,800 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Stock Screener using Technical and Fundamental criteria
MQ Affiliate
Join the MQ Affiliate Program today to earn rewards
 
 

575  350  587 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 FOCUS 0.095+0.005 
 TAWIN-OR 0.075-0.03 
 VIZIONE 0.23-0.015 
 UCREST 0.345-0.005 
 TANCO 0.11+0.01 
 JAKS 0.645+0.03 
 MINHO-WC 0.09-0.015 
 TAWIN 0.155-0.01 
 CAREPLS 2.41+0.18 
 HIAPTEK-WB 0.12+0.01 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. JAKS: What should I response? Any advice! Sslee blog
2. From Permafrost to Precipitation, Calvin Tan Research (At what stage is Glove, Steel/Aluminium & Palm Oil Stocks currently? THE INVESTMENT APPROACH OF CALVIN TAN
3. TAWIN: Enters into EV Market, where EV Copper Demand may potentially rise by 9-FOLD by 2027 gemfinding
4. PALM OIL - The Investment That Separates Billionaires from Millionaires (Reposted article) Calvin Tan Research THE INVESTMENT APPROACH OF CALVIN TAN
5. 下跌股:速柏玛 RM4.17支撑 南洋行家论股
6. What pushes the stock price up or down? Koon Yew Yin Koon Yew Yin's Blog
7. PublicInvest Research Headlines - 7 May 2021 PublicInvest Research
8. SDRED's 31% Stake in Iron Ore Miner is Worth As Much as SDRED's Market Cap Already The Pelham Blue Fund
PARTNERS & BROKERS