• Furniture inspiration. HOMERIZ is a renowned integrated designer, manufacturer and exporter of high-end upholstered home furniture for Original Design Manufacturing (ODM) and Original Equipment Manufacturing (OEM). HOMERIZ has made its mark in the international market by building a diverse customer base spanning over 50 countries worldwide. The group exports more than 98% (remaining 2% is for local market) of its products overseas, mainly to Asia-Pacific (50% of FY7/14 turnover), the Americas and European (46%), and Africa & Middle East (3%). Meanwhile, for the product segmentation, upholstered sofas, upholstered dining chairs and upholstered bed frames contributed 55%, 30%, and 15% to FY7/14 turnover, respectively.
• Current share price is 26% below our Institutional target price of RM1.54. Our Institutional Research remains optimistic on HOMERIZ due to its favourable global consumption of upholstered furniture, beneficiary of stronger US$ (over 95% of its products sold in US$ while an estimated one-third of production cost is in ringgit), strong net cash per share of 23 sen (about 20% of share price) and attractive estimated FY16 yield of 5.2% with 40% dividend policy.
• Poised to test RM1.31 price objective after a brief sideways consolidation. HOMERIZ’s s hare prices retraced 7% from recent peak to close at RM1.14 last Friday. In the last two months, HOMERIZ has been building its base along RM1.11 (23.6% FR) and we opine that ongoing sideways consolidation offers investors good bargain hunting opportunity. Key indicators have entered oversold territory suggesting that further downside potential is limited.
• In anticipation of a positive breakout above downtrend line near RM1.18, HOMERIZ is likely to resume its upward trajectory to test all time high of RM1.23 (2 Mar & 12 Mar) and our target price’ projection of RM1.31, after building its base at key resistance-turned-support turned-resistance zones near RM1.11. Lower support is situated at RM1.08. Cut loss at RM1.05.

Source: Hong Leong Investment Bank Research - 13 Apr 2015