• Business profile. FFHB (listed in 1990) occupies leading positions in the various segments of the Malaysian furniture industry through its three main operating divisions: (1) Interior Fit-out (contributed 62% to FY15 sales and 27% to PBT) : High-end architectural millwork, custom made furniture, fixtures and furnishings for large scale projects such as palaces, hotels, apartments, commercial spaces, corporate offices and institutions. (2) Manufacturing and Export (contributed 30% to FY15 sales and 70% to PBT) : Shop fixtures, modular casework, display and merchandizing units for established international and domestic corporate clients in the retail, F&B, hospitality, commercial etc: The group exports to more than 15 countries in Europe, America, Asia-Pacific, Middle-East and Africa. (3) Retail (contributed 8% to FY15 sales and 3% to PBT) : Its established brandname, KITCHEN PLUS superstore concept is built specifically with home owners, offering end-to-end design, supply and installation of complete kitchens.
• Growing hand in hand with Starbucks’ China. FFHB is currently the sole approved vendor of store sets for Starbucks in 11 Asia-Pacific countries, excluding China. Management is cautious ly optimis tic that FFHB’s solid track record and good relationship with Starbucks will reinforce the standing of the furniture manufacturer, leveraging the coffee chain’s expans ion plan in China (Starbucks intends to increase its store count in the country from ~1,400 today to ~3,400 in the next four years ). Recently, the addition of the Hong Kong Starbucks market that was previously supplied from China could be a strong indication that Starbucks is likely to include FFHB in its China’s expans ion plan (outcome to be known by 2H16).
• In 1Q16, Starbucks ’ China recorded a s tunning 18% jump in revenue and a 5% increase in transactions, despite a slower 1Q16 GDP growth of 6.7% (the lowest in 7 years) as the country is metamorphosing to become an economy driven by consumption.
• Poised for a bullish symmetrical triangle breakout. Having corrected 35% from 52-week high of RM1.22 (13 Jan) to a low of R M0.79 (12 Feb), FFHB’s share prices are steadily trending higher to end at RM1.07 yesterday. We believe the stock is ripe for a bullish triangle breakout soon, supported by positive technical oscillators and higher volume of 862k (299%/438% higher against 1-week/1-month average). Further decisive breakout above RM1.09 (downtrend line) and RM1.14 (21 Mar high) will spur prices higher towards next targets at RM1.22 (52-week high) and RM1.32 (123.6% FR) territory. On the flip side, a decisive breach below RM1.03 (mid Bollinger band) will lead prices heading lower towards RM1.00 psychological support. Cut loss at RM0.98 (1 sen below 50-d SMA).
• Attractive risk to reward ratio with 23.4% upside against 8.4% downside. We see a good risk to reward ratio for investor with a theoretical entry price of RM1.07 given that the downside to the cut loss zone of RM0.98 is 9 sen (-8.4%) while the upside to the LT target of RM1.32 is 25 sen (+23.3%).

Source: Hong Leong Investment Bank Research - 26 Apr 2016