KUALA LUMPUR (Sept 13): Shares of Poh Huat Resources Holdings Bhd (KL:POHUAT) fell to an 11-month low on Friday, after the furniture company reported weaker-than-expected quarterly results.

Poh Huat declined four sen or 3% to RM1.29, its lowest since Oct 19, 2023. At that price, the company had a market capitalisation of RM359 million. Trading volume, however, was thin at 9.30am, with 61,700 million shares changing hands.

Public Investment Bank and TA Securities, the only two research houses covering the stock, were disappointed with the nine-month net profit that only made up 59% of their full-year forecast.

TA Securities flagged slow recovery of the US furniture market, “due to excess inventories that have not yet been cleared”, and slashed its earnings forecast for the financial year ending Oct 31, 2024 (FY2024) by nearly 22% to account for lower utilisation rates at Poh Huat’s Vietnam plant.

The house also cut its target price to RM1.40 from RM1.50, and kept Poh Huat on a ‘hold’ rating.

Shares of Johor-based Poh Huat have reversed recent gains, and Friday’s decline dragged the stock down over 4% year-to-date, amid slower-than-expected recovery in demand from the US that makes up nearly two-thirds of its annual sales.

Peers in the furniture sector have also been under pressure, amid concerns over export revenue, as the ringgit strengthened against the US dollar.

“Moving forward, we expect orders to remain relatively flat due to a slowdown in US household furniture spending on excess inventories,” said Public Investment Bank, which has the stock on ‘underperform’, with a target price of RM1.16.

Despite ongoing efforts to reduce inventory levels, elevated inventories “continue to hinder sales from generating sufficient demand for finished products”, said Public Investment Bank. “We expect the furniture industry to remain challenging in the near term.”

On its part, the company flagged “mixed” prospects for the remaining months of the year.

“While sales of home furniture continued with their downtrend in the first half of 2024, demand for office furniture remains robust as work-from-home arrangements now gradually shift to hybrid and return-to-office arrangements,” Poh Huat said on Thursday.

The company pointed to the results at its Malaysian operations focusing on the panel-based office segment of the market, which reported an increase of 24% in revenue and 56% in profit before tax for the third quarter ended July 31, 2024 (3QFY2024).

All in all, Poh Huat reported that its net profit declined 39% year-on-year to RM2.97 million in 3QFY2024. Net income for the first nine months, meanwhile, was up 29% to RM20.51 million.

The company also declared a dividend of two sen per share, payable on Oct 15.