not vested
TA Research’s analyst Ooi Beng Hooi, who covers Poh Huat, expects a rise in sales for the company although it would be difficult to quantify at this juncture.
“The people in the United States will definitely need to replace their damaged or lost furniture. However, the extent of the damage remains to be seen,” Ooi says.
Ooi tagged a “buy” call on Poh Huat with a target price of RM2.51. “Poh Huat is a listed furniture manufacturer with one of the highest export sales to the United States. More than 90% of its sales are to the United States.
“Some 25% of office furniture are sold to Canada but the Canadian company will usually redirect them to the United States,” Ooi says.
Ooi notes that Poh Huat had recently introduced a new product: panel based bedroom set that’s being manufactured by its Muar plant that will help drive growth in the immediate term.
“Also one of its plants in Vietnam has seen capacity expand by 20% following a renovation after the fire incident there. This is another growth driver for the company,” he says.
On the possible earnings risks from the strengthening ringgit, Ooi reiterates that he still expects for Poh Huat to achieve a record year in 2017 (FY17 ending Oct 31, 2017).
“Without the impact of the foreign exchange, they will still grow unless the ringgit strengthens very significantly,” he says.
In his June report, he says that he has pencilled in a ringgit to US dollar exchange rate assumption of RM4.25 to the dollar in its FY17 earnings forecasts.
While the furniture industry is mostly fragmented in Malaysia, the positive impact will be seen by furniture manufacturers that have most of their sales derived from the United States.
Investors will also have to bear in mind that the impact of natural disasters will mostly be a one-off event that will add to their earnings.
Source: The Star
http://www.thestar.com.my/business/busi ... YITbEkH.99