Poh Huat's 4QFY24 core net profit rose 190% YoY to RM13m, driven by stronger performance from its Malaysia operations on higher turnover for office furniture. Full-year FY24 core net profit came in at RM35.2m, in-line with our estimates at 104% but above consensus estimates at 108% of full-year forecasts respectively. Although demand for office furniture has shown signs of improvement, we remain cautious on the overall furniture industry, as the ongoing inflationary pressures will continue to impact consumer demand. We maintain our FY25-26F earnings forecasts and reiterate our Underperform rating with an unchanged TP of RM1.16 based on 8x 5-year mean PER on CY25F EPS. On a side note, Poh Huat has proposed a final dividend of 2.0 sen per share, bringing the total dividend declared to 8 sen, translating to an attractive dividend yield of 6.1%.

• Revenue. Poh Huat's 4QFY24 revenue rose 23.7% YoY to RM131.1m, driven by a 47.4% YoY increase in Malaysian revenue to RM87.9m, attributed to higher orders and shipments of office furniture as the US business sentiment improved. Strong hiring and more employees returning to offices boosted demand for office furniture. Meanwhile, revenue from its Vietnam operations declined 6.8% YoY to RM43.1m due to subdued US home furnishing spending.
• Net profit. Poh Huat reported an 18% YoY decline in net profit to RM8.9m in 4QFY24, primarily due to a loss of RM1.0m in other income compared to RM10.5m in 4QFY23, largely due to a foreign exchange loss of RM4.9m. Excluding non-operating items, core net profit rose to RM13.0m in 4QFY24 from RM4.5m in 4QFY23. We observe an improvement in the GP margin to 19.7% in 4QFY24 from 16.8% YoY, supported by overall better economies of scale.
• Outlook. Inflationary pressure is expected to persist with the US Federal Reserve signaling slower rate cuts ahead. Meanwhile, US new home sales have slowed down significantly in Oct 2024 to an annualised 610,000, the weakest since Nov 2022. As such, while demand for office furniture is likely to remain steady, we expect the overall furniture industry to be challenging, as we expect inflationary pressure to impact consumer spending on discretionary goods.

Source: PublicInvest Research - 20 Dec 2024