KUALA LUMPUR (April 1): Shares in Poh Huat Resources Holdings Bhd climbed to a three-year high during the morning trade session on Monday, after the furniture maker posted improved quarterly earnings for the first quarter ended Jan 31, 2024 (1QFY2024).
The counter climbed 2.7% or four sen to a three-year high of RM1.52, before paring gains to trade at RM1.50 — still up two sen or 1.35% — with a mere 462,100 shares changing hands.
At RM1.50, Poh Huat was valued at RM417.45 million. Year to date, the group’s share price had climbed 10.29%.
Last Friday, the company posted a 50.9% rise in net profit for 1QFY2024 to RM10.3 million, from RM6.83 million a year earlier, mainly on the back of recording other income of RM1.47 million in contrast to other expenses of RM5.49 million previously.
Meanwhile, the group’s top line increased 9.71% to RM131.14 million from RM119.53 million a year ago, mainly due to a gradual pickup in orders from the US for both the furniture maker’s Malaysian and Vietnamese operations, as US importers began to replenish their inventories.
PublicInvest remains cautious, TA Securities raises TP to RM1.57
However, stripping non-operating items, Poh Huat’s quarterly core net profit fell 27.9% year-on-year to RM10.6 million, according to PublicInvest Research, which was in line with market expectations at 26.5%, but above the research house’s forecast at 31.2%.
“The discrepancy in forecasts was mainly due to higher-than-expected orders from US customers,” PublicInvest said.
The research house underlined that despite the recent sales improvement seen in 1QFY2024, it is taking a cautious stance, as it believes demand for furniture would take a longer time to recover amid the prolonged high-interest rate environment.
“All told, we reiterate our ‘underperform’ call on Poh Huat, and [maintain] our FY2024-2026 earnings forecasts,” it added, with an unchanged target price (TP) of RM1.05 based on eight times calendar year 2024 (CY2024) earnings per share.
PublicInvest opined that it observes freight rates remaining elevated, which would lead to margin squeeze for importers and retailers going forward, coupled with the US Federal Reserve (Fed) showing no rush to cut interest rates, leading to the belief that the furniture industry's recovery would take a longer time given elevated mortgage rates.
Meanwhile, taking a different view, TA Securities believes that US replenishment activities will see Poh Huat receive more sales orders in the coming months, coupled with a potential rate cut by the Fed to aid in reviving the US housing market.
“Given a brighter outlook in the US furniture market, we increase the target price-earnings rate multiple for Poh Huat from eight times to nine times,” TA Securities said in a note on Monday.
“Consequently, we tweak our TP higher from RM1.40 to RM1.57, based on nine times CY2025 earnings,” the research house added, maintaining its 'hold' call on the stock.