Posted by asahmad > 2014-09-10 14:54 | Report Abuse

kcchongnz .how about AHB :)

Posted by トム > 2014-09-10 15:12 | Report Abuse

buy call?

Posted by vaentec > 2014-09-10 17:14 | Report Abuse

My concern about latitude is if the earnings are sustainable.

Posted by sense maker > 2014-09-10 18:25 | Report Abuse

Hi kcchongnz:

Some additional points:

1) Liihen is in a net cash position. So, its leverage or net debt is nil.

2) The extra cash in hand Liihen holds provides liquidity safety in case of an economic downturn. Based on the formulas you use, this extra cash in hand has a punitive effect as it lowers ROE and ROA since it is a part of the denominators. As such, the picture is rather distorted unless some of the extra cash in hand is scaled down to industrial benchmark in calculating ROE and ROA for comparison with other players.

3) Some companies are already paying great dividend like Liihen but others still have to pay off its net debt for another 1 to 2 years before it can sell a good dividend story to the investors. Dividend yield is a big consideration for an investor.

Anyway, good luck and thanks for the write-up.

Posted by soojinhou > 2014-09-10 19:13 | Report Abuse

Hevea posted fantastic results in spite of its high gearing, and therefore high finance cost. It is aggressively paying down its debt and therefore, growth prospect is much stronger as finance cost shrinks. In addition to its growth prospect and low valuation for both price to book and price earning ratio, I like their business because it uses wood chips as raw material and also sells particle board as well as furniture. Wood chip is easier to source as opposed to solid wood. Its particle board whose main market is China is also turning a profit. Overall, on top of its attractive valuation, I believe its business model is more resilient than the rest of the furniture companies you mentioned above. I am vested in Hevea.

Posted by soojinhou > 2014-09-10 19:21 | Report Abuse

You may also find it interesting that despite Japan increasing their consumption tax since April 1st, which hit their furniture sales as Japan is their main market for ready-to-assemble furnitures, Hevea still posted solid Q2 results. This is because sales of particle board, which goes mainly to China, posted solid gains. This is the same comment by Cold Eye, if particle board market sux, it can always use the boards internally to make furnitures. If market is good, it can sell the boards. This is a nice feature of Hevea that is not quantifiable.

Posted by kcchongnz > 2014-09-10 19:25 | Report Abuse

Sense maker, thanks for the comments. appreciate that.

1)Yes, debt can distort ROE. Lii Hen does have net cash (cash -total debt), so do most of those companies except Hevea. However the leverage in DuPont Analysis of ROE is not whether if the company is net cash or not, but that "leverage" is Total asset/Total equity, of which debts contribute most of the numerator of that ratio. In fact the financial leverage of Lii Hen is the highest at 1.6. Homeritz's financial leverage is only 1.2, and Latitude 1.5 as show in Table 3.

2) Yes again, excess cash distorts ROE, but it will be fully reflected from ROIC, ie the return on invested capital, where excess cash is less off from invested capital, IC. In this respect, Lii Hen is better than other companies, but not as good as Homeritz and Latitude. In fact Homeritz is way ahead as shown in Table 3 with ROIC at 45.7%, against the 18.9% of Lii Hen.

3) Partly agree with you on this point. I think Homeritz dividend yield is as good as Lii Hen.

Posted by kcchongnz > 2014-09-10 19:37 | Report Abuse

soojinhou,

Hevea certainly has it plus points. Yes its good qualitative aspect is as important. And price-to-book and price-to-sale which Hevea is the lowest are also important valuation metrics. Its future prospect is also important if you are certain and best if you can quantify them.

However, earnings wise, though Hevea is the lowest, I more care about EV/Ebit, ie the valuation of the whole firm. this is because Hevea with a lot of borrowings whereas others don't, it is more appropriate to value the whole firm which both capital providers should be taken into considerations. Like what sense maker said, it distorts the efficiency and valuation metrics.

Posted by cherry88 > 2014-09-10 21:13 | Report Abuse

Poh Huat has just annunced its quarterly results......I have commented the same in the stock quote....just reproduce here for sharing purposes....


As expected, the company announced its 3rd quarter results early this round as compred to all previous round. It was actually hinted from the "intention to deal during closed period" announcement on 11/8. The company declared its first ever 3% interim dividend this round, which never happen before. It is a great improvement as I think they try to follow its competitor's (Lii Hen) trend by declaring dividend quarterly ! Both Lii Hen and Poh Huat are located at the same industrial area in Muar furniture town.

At a glance, the company profits was doubled to RM12.5mil from RM6.3mil. "The improvement in the bottom line was due to the absence of the allowance for impairment losses of RM5.56 million recorded in the previous corresponding quarter" Disclosed in the Notes. It was a very good news as we know there will have a steady profit moving forward.

Segmental wise, its Malaysia division is improving progressively. However, its Vietnamese division incurred lower profit margin due to "the disruptions brought on by the anti- Chinese riots and loss of factory efficiency arising from the development of new products". Again, this is one-off event and should not concern us. We also can see that its Vietnamese division is still in increasing tread if we compare to its precedding quarter as tabled in Note B2. I noticed the quarterly report has been very transparent and analytical as compared to its earlier released Notes. This show the company is willing to share its business activitties to the investors which is a plus point to existing and potential investors.

The company financial position is strong too. It is technically a debt-free company, given its cash balance of RM50.8mil against bank borrowing of RM46.9mil. I belive it can declare even more dividend in the coming months. Assuming history is the guide on this company where it declared a sepcial dividend of 2% last year and another 3% final dividend in last financial year 2013. I expect the same trend to repeat this year. So, total dividend is expected to 8% (3% declared + 2% special + 3% final). This is no problem given its huge cash balance sitting in the banks.

Let's go beyond this current quarter, and we expect the coming final querter to be similar to its previous final quarter which recorded an EPS of 9.88 sen, the whole year EPS could go to 21.83 sen (11.95 sen + 9.88 sen). Further assume they will follow Lii Hen unofficial dividend policy of 50%, I can expect Poh Huat will declare even higher dividend this year of up to 9 ~ 11 sen !! This will translate an expected yield of 7.1% !

Posted by wwwcomment > 2014-09-11 07:50 | Report Abuse

Bot some hevea and latitude. Shud hv done it earlier. But I dont think is late now.

Posted by paperplane > 2019-10-11 02:20 | Report Abuse

good one

Posted by paperplane > 2019-10-11 19:26 | Report Abuse

kc, why u din use Graham Formula
Value=current earning x (8.5 plus twice expect growth rste)