Review

• Excluding a foreign exchange loss of RM6.5mn, POHUAT’s FY24 core profit of RM35.8mn came in above expectations, accounting for 113.2% and 109.4% of ours and consensus full-year estimates. The variance was mainly due to stronger-than-expected sales from Malaysia's operations.

• A final dividend of 2.0sen/share was declared, bringing the YTD dividend to 8.0sen/share. (FY23: 7.0sen/share)

• YoY, FY24 core profit surged 44.4% to RM35.8mn as revenue increased by 11.1% to RM475.7mn. The better earnings performance was largely attributed to a demand recovery for office furniture in the US, driven by strong employment and more employees returning to the office postpandemic.

• Additionally, the improved earnings were partly supported by higher efficiency and an improved factory utilisation rate in Malaysia’s operations. As a result, the PBT for Malaysia’s operations increased by 16.1% to RM29.7mn. On the other hand, Vietnam's operations saw its PBT fall 8.5% to RM9.3mn, primarily owing to weak demand for home furniture in the US.

• QoQ, 4QFY24 core profit surged by 109.1% to RM13.7mn, while revenue increased by 24.7% to RM131.1mn. The stronger earnings performance was mainly attributable to the seasonal peak in shipments ahead of the festive season, particularly in furniture spending for the office segment. Additionally, both Malaysia and Vietnam operations benefited from improved factory utilisation rates. Notably, the Vietnam operations returned to profitability, recording a PBT of RM3.8mn compared to a LBT of RM0.9mn a quarter ago.

• Its balance sheet remains solid, with zero debt and a net cash position of RM294.1mn or RM1.06/share.

Impact

• Maintain our FY25 and FY26 earnings forecasts. Meanwhile, we introduce the FY27 earnings forecast of RM49.9mn, representing an earnings growth of 3.9%.

Outlook

• Overall, we believe POHUAT is likely to see increasing orders for home furniture in the coming months, as the end of the US interest rate upcycle is expected to boost the housing market, which, in turn, will gradually drive-up demand for home furniture.

Valuation

• No change to our target price of RM1.40, based on unchanged 9x CY25 EPS. Maintain a Hold call on the stock.

Source: TA Research - 20 Dec 2024