KUALA LUMPUR (June 27): Shares in Poh Huat Resources Holdings Bhd (KL:POHUAT) fell to their lowest in more than two months, after the furniture maker reported weaker-than-expected results for the second quarter ended April 30, 2024 (2QFY2024).
Poh Huat slipped 2% or three sen to RM1.41, its lowest since April 19, on Thursday morning. The stock closed at RM1.45, valuing the company at RM403 million on Bursa Malaysia. Trading volume totalled 390,400 shares, nearly tripled the 200-day moving average.
TA Securities, one of only two research houses covering Poh Huat, flagged a slow recovery in demand from the US market that makes up nearly two-thirds of the company's annual sales. Canada accounts for about 30% of total sales, with the rest from Malaysia, UK, Singapore and the Middle East, Poh Huat's 2023 annual report showed.
High US interest rates may finally come to an end as inflation cools, and the first rate cut could occur at the end of 2024, based on the latest US Federal Reserve’s guidance, TA Securities said. “This could help revive the US housing market,” it noted.
Thursday’s share price decline cut Poh Huat’s gain so far this year to about 4%. Shares in larger and smaller peers in the furniture sector have mostly gained in 2024, amid hopes that a strong greenback would boost export revenue, and help offset tepid demand weighed by the slowdown in the US housing market.
Poh Huat's net profit surged nearly 70% year-on-year to RM7.23 million for 2QFY2024, lifting total profit for the first half to RM17.53 million. After excluding foreign exchange gains of about RM2 million, first-half core net profit only accounted for less than 39% of the consensus full-year estimate.
TA Securities reduced its earnings forecast for FY2024 by 11.4% to reflect a lower utilisation rate of Poh Huat's plant in Vietnam that mainly caters to the US market. The research house also lowered its target price (TP) to RM1.50, from RM1.57 previously, and maintained its ‘hold’ call on the stock.
Public Investment Bank, meanwhile, has an ‘underperform’ recommendation for Poh Huat, with a TP of RM1.16.
“We believe the furniture industry will continue to be challenging going forward as the US market is experiencing a slowdown, with importers and retailers clearing excess inventories,” Public Investment Bank said. “We anticipate sales orders to remain flat going forward.”
On its part, Poh Huat flagged reduced consumer spending on durable goods due to a slowdown in the US economy, which will likely affect demand for durable household items, including furniture.