WOOD furniture manufacturer Lii Hen (Fundamental score: 2.5/3, Valuation score 2.4/3) is an exporter, has a sustainable business model, is in a net cash position, and pays good dividend.

As with many furniture-related companies, including our previous recommendations Poh Huat, Latitude Tree, Homeritz, Lii Hen has been gaining investor interest of late. Its stock price closed at a year’s high of RM 3.64 last Friday.

Sales recovered strongly in 9M2014, up 27% y-y to RM295 million, driven mainly by the recovery in the US — Lii Hen’s single biggest market, which accounted for 80% of sales. Recall that sales to the US fell 14% in 2013 but were up nearly 33% in 9M2014 as its economy regains traction.

Net profit was up 45% y-y to RM20.5 million during this period. In addition to the topline growth, earnings were lifted by one-off insurance claims amounting to RM3.5 million.

Looking ahead, the company stands to gain from the depreciation of the ringgit. Export accounted for over 93% of sales in 9M2014. Aside from America, Asia is its second largest market, contributing to some 12% of sales.

In January 2015, Lii Hen recognised a revaluation surplus totalling RM34.9 mil, boosting net assets per share by approximately RM0.58 to RM2.62. Most of the revalued land and buildings are manufacturing plants located in Johor.

The company is sitting on net cash of RM22.7 million.

Historically, Lii Hen has rewarded shareholders with dividend payout ranging from 30% to 50% of profits. Dividends totaled 15 sen per share in 2013, giving a yield of 4.2% at the current price, and 11 sen, so far for 9M2014.

Lii Hen’s valuations are attractive. Although the stock is trading at 1.35 times book value, trailing 12-month PER is only 8.71 times.

This article first appeared in The Edge Financial Daily, on February 16, 2015.

http://www.theedgemarkets.com/my/article/insider-asia%E2%80%99s-stock-day-lii-hen-industries