JAYCORP (7152): Trailing 4Q Financial Results

FURNITURE manufacturer Jaycorp Bhd is one of the companies that are thriving in the Covid-19 economy. Tightening international border controls and a ban on interstate travel in response to the pandemic have led to a reversal in the company’s fortunes as people spend more time in their homes and money on home furniture products.

Backed by strong orders, the company is confident of beating its previous earnings record of RM24.69 million achieved in its financial year ended July 31, 2017 (FY2017). In fact, Jaycorp’s net profit of RM22.45 million for 1HFY2021 has exceeded that for the past three financial years (FY2020-FY2018) of RM17.4 million, RM19.82 million and RM10.29 million respectively.

Its executive director Muaz Jema Anton Khan expects the company to report its “best-ever year” as earnings have improved substantially amid the Covid-19 stay-at-home orders.

“The local market has been good because of the pandemic. [That’s because] a large chunk of disposable income now goes to home furnishings instead of being used for travelling, as people are stuck at home. This is very different from pre-pandemic,” Muaz tells The Edge.

Still, the Covid-19 outbreak had initially impacted Jaycorp’s earnings when the first Movement Control Order (MCO) was imposed in March last year, forcing the company to temporarily shut down operations. As a result, Jaycorp saw its net profit fall 12.2% to RM17.4 million in FY2020 from RM19.82 million in FY2019, while revenue was down 3.9% to RM309.35 million from RM321.95 million in the same period.

The weaker performance in FY2020 was also because of its kiln-drying segment posting a pre-tax loss of RM3.39 million versus the pre-tax profit of RM339,000 in FY2019 as a result of a write-down of inventories in the Malaysian subsidiary and a provision for employee benefits and tax penalty expenses in the Indonesian subsidiary.

Muaz explains that it was quite difficult for Jaycorp’s customers to physically look at its products or new models given the lockdown, adding that its major markets are Japan and South Korea.

“Customers generally want to come to the factory and see our products, particularly the new models. But we’ve adapted by having a digital showroom now. The pandemic has actually shown us that we need to modernise our operations.

“As such, we’ve become much more proficient in delivering our value proposition online even though some of our factories are quite remote,” he says.

The company also works closely with its customers in terms of product development. “We’re always trying to go up the value chain … trying to do higher-margin products and also looking at what is selling, as well as the market trends. At the same time, we will also try new designs and see how that works,” he adds.

Last month, Jaycorp had to halt operations at two of its factories in Johor for 10 days for sanitisation purposes as some of its employees tested positive for Covid-19. Muaz, however, says the temporary shutdown will not have any material impact on the company’s financial performance. “There will only be a delay (in orders), but I think we will be able to catch up quite quickly.”

While orders and queries from customers are robust, Muaz says it is difficult to gauge whether the trend will last until after the pandemic. “For instance, my consumption of delivery food has increased a lot, but once we come out of the pandemic, am I going to stop ordering food? No, I actually think I would probably order slightly more than I did before the lockdown because we already have that sort of behaviour ingrained in us.

“So, I don’t think there will be a massive drop (in sales), but it is hard to say.”

Expanding manufacturing capacity on the cards
While Muaz notes that Jaycorp is open to taking new orders, the manufacturing capacity of its furniture division is already running at over 90%. Thus, it is “quite difficult” now to take on new customers that have substantial volume orders, he says.

“We are always looking at expanding our capacity, but I think, given the current situation, the priority is shifting towards automation.

“Traditionally, the manufacturing business has been quite labour-intensive, so we are looking at new technologies that could essentially reduce the manpower,” says Muaz.

Jaycorp has set aside RM5 million to RM6 million in capital expenditure (capex) mainly for the purchase of new machines, which will be funded via 70% internal funds and 30% borrowings.

As at Jan 31, 2021, Jaycorp had a cash balance of RM52.57 million and borrowings of RM27.42 million, leading to a net cash position of RM25.15 million.

Muaz says the company will be cautious about spending as the uncertainty will linger for some time. “We are open to any merger and acquisition for our furniture division, but it will depend on the valuation and what capability the (acquisition target) can bring to the group.”

Setting a dividend policy
Despite not having a dividend policy, Jaycorp has been consistently pay

2021-05-12 18:50

rachelteh

moneycome123456 Hi may i know where do you get the info? Beginner trying to learn more from the senior here:)

2021-05-18 14:38

Rachelte, just download klse screener, there have many info.

2021-05-19 09:47

oldbeginner

Result just out . Superb

2021-06-29 20:02

chillibumbum

very good qr again. end of year dividend will be huge

2021-06-30 09:11

bktay123

buy

2021-09-08 10:04

MikeAl

1.86 highest.. sell it off already

2021-09-08 10:27

Samuelgold

What happened, y spike up so sudden

2021-09-08 11:55

stocking

exceptional good quarter

2021-09-08 12:24

MikeAl

final qtr were usually good qtr for jaycorp.. buyers speculating another good dividend payment for final Qtr of FY ended July 2021

2021-09-09 10:32

bgbk3010

this stocks heavily pegged to the US dollars

2021-09-09 11:26

Jack888

uptrend.... coming soon.

2021-09-13 16:09

kfbusjd

... who run faster who safe.

2021-09-29 18:31

kfbusjd

qr boom

2021-09-29 18:31

Samuelgold

Accumulate time

2021-09-30 09:06

bktay123

RM2 million loss only

2021-09-30 09:10

MikeAl

9 sen drop because they did not declare any dividend?

2021-09-30 09:25

SpencerW

Not bad at all .... losses only from kiln drying. The other manufacturing businesses remained profitable even though closed for 2 out of 3 months due to lockdown! This quarter should be better with manufacturing back to production since end Aug (i.e. will be operating for 2 out of 3 months in this current quarter). Management must be confident of recovery to declare 5.5 sen final dividend.

2021-09-30 09:27

Invest_888

SUBUR(6904) is the best furniture stock with oil palm estate, it is only 82.5cent. Big discount!!!
Latest financial quarterly result, EPS= 10.29 cent, NAV= RM3.07. Can consider to buy it.

2021-09-30 22:06

Patrick13

1 to 1 bonus issue coming!

2021-10-21 17:33

Yea, bonus coming

2021-10-21 18:57

worktoinvest

More show soon. Go go go

2021-10-22 10:14

ipohwhitecoffee

looks like a trap. better cut lost fast

2021-10-22 10:44

Bought @ 1.66 & in 2 weeks times sold @ RM1.91 with 15% gain.

thank you for the bonus.

2021-10-22 17:13

Though still don't understand why market still react to the bonus issue, but not bad to existing holders.

Congratulations to all existing shareholders.

2021-10-22 17:14

valuewood11

if continue pay same dividend after bonus, it will be high yield dividend stocks

2021-10-23 00:42

It will pay div 1st, after tat bonus issue at next year 1st quarter.

2021-10-24 17:22

James Ng

https://klse.i3investor.com/blogs/general/2021-10-24-story-h1592859191.jsp
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2021-10-24 19:53

jiamuksy

My take on the intrisic value beofre and after the bonus issue.

https://youtu.be/oWMiD0mPJwA

2021-10-25 17:33

May it go back to the level before bonus issue? Let’s see

2021-10-26 10:40

1 week trip

2021-10-27 18:23

ipohwhitecoffee

see, obvious trap. who bought 2.00 really Holland.

People bonus is Limit up, this one bonus is trap ppl. Lousy stock. Jz avoid.

2021-10-27 20:02

Dakewlest

Does Anyone know why jaycorp incurred loss last quarter?

2021-11-05 00:45

Price up....... Result announced soon?

2021-11-08 15:40

Buy in.dividend.6.5.%.good.counter..1.72.Buy in hold

2021-11-09 11:39

Jack888

Bonus issue approved..?

2021-11-16 08:54

Samuelgold

Dividend 0.055 notbad

2021-11-16 19:48

Buy in 1.72.how in good counter.lol

2022-01-20 17:42

Buy in pharmaniaga 7018.=0.85. High dividend.hold until 3.00 plus lol

2022-02-24 02:48

killdavid

why suddenly dropped ? Anything changed ?

2022-03-11 17:09