Review

• Excluding a foreign exchange loss of RM1.1mn and gain on disposal of unquoted investments of RM3.0mn, POHUAT’s FY23 core profit of RM24.8mn came in below expectations, accounting for 78.0% and 76.7% of ours and consensus full-year estimates. The variance was mainly due to lower-than-expected demand for furniture from the US.

• A final dividend of 2.0sen/share was declared, bringing the YTD dividend to 7.0sen/share. (FY22: 8.0sen/share)

• YoY, FY23 core profit fell by 68.2% to RM24.8mn as revenue fell by 39.1% to RM428.1mn. The weaker earnings performance was largely due to persistent soft demand from the US following the peak spending during the pandemic. Additionally, slower furniture demand in the US was partly attributed to the lacklustre property sector due to the high interest rate.

• QoQ, 4QFY23 core profit dropped by 7.8% to RM4.0mn while revenue was 1.3% lower at RM105.9mn. The softer earnings performance was primarily attributed to higher administrative expenses.

• Its balance sheet remains solid with zero debt and a net cash position of RM308.6mn or RM1.16/share.

Impact

• Maintain our FY24 and FY25 earnings forecasts. Meanwhile, we introduce the FY26 earnings forecast of RM52.1mn, representing an earnings growth of 8.8%

Outlook

• Generally, we expect a better year ahead for the furniture sector, as the interest hike in the US may finally come to an end following the inflation cooling off. Hence, the demand for furniture will gradually increase once the US housing market starts to recover.

Valuation

• After rolling forward our valuation base year to CY25, we tweaked the target price higher from RM1.33 to RM1.40, based on 8xCY25 earnings. Maintain Hold call on POHUAT. We believe the solid balance sheet with a strong cash pile of RM308.6mn will help the group to sail through the near-term headwinds.

Source: TA Research - 15 Dec 2023