Review

• Excluding a foreign exchange loss of RM1.6mn, POHUAT’s 9MFY24 core profit of RM22.1mn came in below expectations, accounting for 54.6% and 59.1% of ours and consensus full-year estimates. The variance was mainly due to lower-than-expected sales from Vietnam's operations.

• A third interim dividend of 2.0sen/share was declared, bringing the YTD dividend to 6.0sen/share. (9MFY24: 5.0sen/share)

• YoY, 9MFY24 core profit jumped 6.2% to RM22.1mn as revenue increased by 7.0% to RM344.6mn. The stronger earnings performance was mainly attributed to higher efficiency and improved factory utilisation rate in Malaysia’s operations. The PBT for Malaysia’s operations jumped by 55.7% to RM21.7mn, while the PBT margin improved by 2.4%-pts to 10.3%. On the other hand, Vietnam's operations saw its PBT fall 22.0% to RM5.6mn, primarily owing to weak demand for home furniture in the US.

• QoQ, 3QFY24 core profit jumped by 32.2% to RM6.6mn, although revenue was 3.0% lower at RM105.1mn. The stronger bottom line was largely driven by a better factory utilisation rate in Malaysia's operations.

• Its balance sheet remains solid, with zero debt and a net cash position of RM289.5mn or RM1.04/share.

Impact

• Following the weaker-than-expected results, earnings forecasts for FY24/FY25/FY26 were reduced by 21.9%/7.4%/4.3%, respectively, after factoring in the lower utilisation rate for the Vietnam plant.

Outlook

• The US furniture market is still on a slow recovery trajectory due to excess inventories that have not yet been cleared. Nevertheless, we believe that the potential end of the US interest rate upcycle will help boost the housing market, which in turn will increase demand for home furniture.

Valuation

• After revising the earnings forecasts, we tweaked the target price lower from RM1.50 to RM1.40, based on unchanged 9x CY25 EPS. Maintain a Hold call on the stock.

Source: TA Research - 13 Sept 2024