no doubt stronger USD will boost up furniture export, but ..........

why never invest 100% capital in furniture related counters even though USD getting stronger

duitKWSPkita
Publish date: Tue, 06 Jan 2015, 12:21 AM
duitKWSPkita
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Dear All Existing Investors and Potential Investors,

No doubt the stronger USD currency will boost up furniture related products export. But one must knows how can the strong USD bring extra profit to the company.  Below are all the furniture related listed company that I can think of:

Ahb (7315) 
Dps (7198)
Eg (8907)
Eksons (9016)
Eurosp (7094)
Facbind (2984)
Ffhb (8605)
Hevea (5095)
Homeriz (5160)
Jaycorp (7152)
Latitud (7006)
Lcheong (7943)
Liihen (7089)
Pohuat (7088)
Sernkou (7180)
Shh (7412)
Sign (7246)
Syf (7082)
Tafi (7211)
Tiger (7079)
Swscap (7186)
 
Readers, you must complaint now why so large of sample pool how can you choose the best out of the best. I have filtered out some Tier -1 counters based on consistency of dividend yield, strong balance sheet, strong cash flow from operating activities, good profit margin and good top management. I would like to suggest EKSONS, HEVEA, FACBIND, HOMERIZ, LATITUD, POHUAT, SERNKOU and SYF.
 
In Malaysia, we have more than 4200 plus mills which consists of sawmills, fibreboard mills, plywood/veneer, moulding, kiln drying preservation pants and others. Beside that, we have more than 2200 plus furniture plants which make furniture in various range of final products. The above mentioned listed companies play very important role to sourcing for the best quality material & most competitive raw material price to manufacture into their final furniture products. Today Malaysia export more than RM21 billion of wooden and rattan furniture worldwide. Furniture itself already registered more than RM6 billion per year of export revenue.
 
Please allow me to share with you some important technical info because it would be essential for our fundamental analysis in next part. We are among the top 8 largest furniture exporting countries right after China, Germany, Italy, Poland, Vietnam, United States and Canada. On th other hand, world largest importing countries for furniture products are United States, Germany, France, Japan, UK, Canada and Middle East.
 
I try not to confuse you so I skip all origin of furniture imports figure here. For Malaysia perspective statistically shown that the ranking of exporting destination as folowing: United States>Japan>Singapore>UK>Australia>UAE>Canada then India.
Note that Japan's importing figure jumped due to rebuilding home post tsunami. Bear in mind that when one mentions about furniture not necessary he refers to almari, perabot, meja makan or sofa sahaja but the wide products range cover 1)wooden furniture, 2)rattan furniture, 3)metal furniture, 4)furniture parts, 5)matress, 6)adjusted furniture, 7)niche furniture, 8)vehicle seats, 9)medical furniture and 10)stone & ceramic furniture. We need to further evaluate which are the main exported products from our desired investing company. Not all products offer good premium price.
 
There are two(2) common ways for a furniture related listed company gain additional money when USD appreciate against Ringgit. 
1) Customer import more quantity of furniture in conjuntion with stronger buying power
2) Customer switch order sales from other country to Malaysia (the main stream of building extra profit)
 
Let's examine one by one
  • 1) Customer import more quantity of furniture in conjunction with stronger buying power
  • This is the least positive impact to one listed company because the buyer might still paying for the same amount while getting more quantities.
  • For example: In June 2014 - Sales price for a 3 seaters sofa priced at RM2,000/USD633 (1USD: 3.16Ringgit). An importer from US sign contract to import 3 seaters sofa with the amount of USD 150,000 per month. Ideally the US importer will receive 237 sets (USD150,000/USD633=237) every month.
  • ------------------In Feb 2015 - Sales price for a 3 seaters sofa priced at RM2,000/USD571 ( 1USD : 3.50Ringgit). An importer from US sign contract to import 3 seaters sofa with the amount of USD 150,000 per month. So with the changes local manufacturer manage to sell 263 sets (USD150,000/USD571=263) every month.
  • ###### In fact the Malaysia manufacturer gain additional money from the weakness of ringgit. However, the profit is not as huge as per discussed in the newspaper should ringgit depreciate less than 15% over the full financial period.
 
  • 2) Customer switch order sales from other country to Malaysia (high impact business improvement)
  • This is the best market condition whereby oversea importers completely switch their orders from other exporting countries such as CHINA or VIETNAM to Malaysia. So we can gain the big jump profits from improved production capacity. I will not expect importers switch their order European countries like Germany or Italy simply because our Malaysia manufacturer do not produce same design with the European do. Hence, we gonna have big hope to compete Vietnam and China based on the world's largest exporting countries statistic.
  • ##### If this happens over the next few months then we gonna see the real big jump from Tier-1 furniture counters.
 
 
 
After so many positive factors from the above discussion points, now please allow me to draw my potential step back factors. I would like to discuss my personal view based on the most biggest exporting destination US,Japan, Singapore, UK, UAE, Australia, Canada and India
  1.  US & Canada - US market is volatile and expected to undergo market downturn after this quarter
  2. Japan- Rebuilding home (post-tsunami) projects almost over ; but government devalue japanese yen might stimulate buying interest so most probably will bring POSITIVE to us
  3. Singapore - This country currently undergoes economic downturn and everyone could read how bad the property sector (less peoples move in new house, lesser furniture purchasing)
  4. Australia - Aus has announced to stop the most of the mining and foresee will follow global economic downturn
  5.  UAE - Potential big buyer for most of the Malaysia's companies but recent Crude Oil price collapse (might bubble burst for oil & gas industry) will pause the demand for importing 
  6.  UK - Stable market but not big weightage from Malaysia exporting's figure (5.2%) while US(27%) , Japan (12%) and Singapore (9%)
  7. India - Relatively low in importing portion compared to US, Japan and Singapore
 
Do we have better position to compete with China in terms of exporting figures when China government really put effort to bring down the Chinese Yuan while they inital sales prices are always more competitive than ours. Vietnam has beter economic of scale with bigger market capital right now so they probably will utilise their bargaining power of seller to compete in the international market.
 
Conclusion: I fully agreed that Malaysia's furniture related listed companies will gain extra profits from the weaker ringgit currency by exporting more products. However, we must perform sufficient scan and screen in terms of fundamental analysis, USD cost sensitivity analysis, and other necessary factors in one desired listed company in order to avoid the overbought market.
 
 
Discussions
6 people like this. Showing 11 of 11 comments

calvintaneng

Correct. Never put all eggs in one basket

2015-01-06 00:29

duitKWSPkita

yes correct calvintaneng. Never put all sofa in a living room. Must put coffee table and pc desk other than sofa. Thanks for reading calvintaneng bro.

2015-01-06 00:43

bfmtechnology

Thanks for good info!

2015-01-06 08:37

duitKWSPkita

Dear ks55,

Good morning. Agreed 山雨欲来风满楼.

That's why I hinted peoples there.

鸟下绿芜秦苑夕　蝉鸣黄叶汉宫秋
行人莫问当年事　故国东来渭水流

anyway, thanks for highlight.

2015-01-06 09:24

Jonathan Keung

thanks for the write up (after a much disappointed new year) weakening ringgit against the USD. KLCI index going south. some consolation (at least ) some sectors will gain an added advantage

2015-01-06 09:36

dereklim

my take that today is good time to buy furniture stocks. market in panic now. may not get this chance again

2015-01-06 09:44

duitKWSPkita

thanks for your kind note dereklim. I am neutral on your statement of "may not get this chance again" but for sure furniture is a MUST BUY sector.

I am still very new in this investment line as I need to do a lot of analysis to support my own BUY CALL based on my attitude. I need longer times to anaylze one by one company with the nature of business and 2015-2016 business operation plan and sales anticipation before option for the greatest companies. You might laugh at me why so stupid for doing it. AT least, I am training myself of better risk management.

Same things happened few months ago when most of my friends blindly chased Aluminium counters. I found something "abnormal" when I compared the pure upstream, midstream and intergrated aluminum players in terms of 1) Revenue vs Net Profit and 2) Net Profit vs Profit Margin. Luckily I did not made simple mistake chased high on those so called "market sentiment" alumimium counters.

Ok....... I will continue to learn from you all. Cheers and best luck in all trading.

Posted by dereklim > Jan 6, 2015 09:44 AM | Report Abuse

my take that today is good time to buy furniture stocks. market in panic now. may not get this chance again

2015-01-06 09:56

Ven Felix

Juz want to Add some element of factors here, The chem based coating and Thinner consumers will hv benefited from the Down turn of d crude oil. This will added some margin to the industry who consume them heavily.

2015-01-06 22:15

duitkwspkita

Thanks Ven Felix for your kind inputs. All the Tier-1 furniture counters are profitable one, it is good to invest especially they can benefit from strong USD currency.

Same message here. Do not allocate 100% of our capital in the same "group" of investment portfolio.

2015-01-08 16:32

duitKWSPkita

all Tier-1 furniture counters also shoot up.

what else after these:EKSONS, HEVEA, FACBIND, HOMERIZ, LATITUD, POHUAT, SERNKOU and SYF

really an advance angpau for CNY.... do not forget to upgrade your sofa, chair, dresser, cabinet and shoes rack BUT NOT for DINING TABLE.

congrad and best luck!!!!!!!

2015-01-12 10:17

yongyou

Thanks bro duit

2015-03-05 16:33

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