Poh Huat Resources Berhad

Company : Poh Huat Berhad

http://www.pohhuat.com/

 Business :

Manufacturing of furniture with base in Muar Johor and Vietnam. 90% of their exports are going to USA and Canada market. One of key furniture players in South East Asia. They also OEM for major importers in North America targeting medium to upper medium market (products from Vietnam plants). They make home and home-office furniture.

 

Fundamental :

Another net cash company with RM182 million based on 2020 report (see below) and company is giving out dividen for 3 quarters in a year. Pretty good dividen yield. You can see the net cash is growing every year. Thumbs up to management and board of directors.

 

5 years revenue and profit before tax as follow. The revenue was rising from 2016 to 2019 but dropped in 2020. If not because of MCO, I think 2020 revenue should be higher. Profit before tax was in the range of RM58 million to RM67 million. 

 

 

Poh Huat - Q1 Result

 

As mentioned in their report, the drop in Malaysia revenue is due to production disruption cause by COVID-19.

 

Prospect:

Well, the common phrase you always hear is “Work From Home”. If there are no proper workstation at home, how to work from home? There are few positives things for Poh Huat.

• US-China trade war will still continue although Joe Biden is the new president. (China is the largest furniture exporter in the world)
• Work from home trend in USA.
• USA stimulus package will make more disposable income for US citizens.
• US/RM exchange rate is still very favorable to company.
• High dividen yield and pay in 3 quarters (approx. 40% profit will be paid)
• Growing cash pile in the company (One day cash will become too much)
• Down side risk seem low at the moment ( Support price is RM1.37 based on their chart) 

 The outlook taken from their Q1 report.

My view on share price:

It is a recovery and dividen play for Poh Huat. I won’t expect PE to be higher than 10 because average PE for furniture makers is always below 10. The peak price was RM2.00 around 18 Nov 2020 before announcing record revenue and profit. I doubt it will reach RM2.00 again. Dividen yield looks very attractive (total 9 cents last year).  

 

 

 

Q2 is traditionally low quarter and Q4 is traditionally good quarter. So my forecast EPS for whole year will 19 cents and PE will be 7.7 at price of RM1.47

Q1	Q2	Q3	Q4	Total
3.63	3	5	8	19

 

The biggest risk is production shutdown due to MCO3. I’m still not sure if they are allowed to operate during MCO 3. However, the Vietnam plants will help to mitigate the risk. I would suggest to wait for Q2 result for bargain price if wish to invest in this company.