Lii Hen Industries Berhad - Big Brother in Furniture Industry

 

Company : Lii Hen Industries Berhad – Big brother in furniture Industry

Business :

Manufacture wide range furniture products (office & home) and export to oversea with North America constituted about 91% of the revenue. The factories are located in Muar and Tangkak districts. Company also planting rubber trees in Johor. Company is the clear leader in Malaysia furniture industry.

 

 

Fundamental :

The company has net cash of RM160 million (2020 report) and pay dividen every quarter. Strong cash flow as products are exported oversea. Company is profitable every year and revenue are increasing steadily from 2016 to 2020. It is definitely a growth company. However, 2021 revenue will drop due to MCO lockdowns.

 

 5 years revenue

There is clear sign of growth revenue from 216 to 2020. Probably due to trade-war between China and USA. Both CAGR- revenue and PAT are showing growth.

 

 Sales Related:

Geography break down of the revenue for 2020 is as follow.

Their customers are US furniture importers, wholesalers and retailers. Company is a clear beneficiary from USA-China trade war and has established strong foothold in NA market.

 

Cost of sales

Two major costs are raw material and labour cost.

 

Lates result at glance :

The Q2 revenue and profit have dropped on YoY and QoQ basis. Primarily due to MCO shutdowns. It has been 4 quarters on the row that revenue drop. However, company still manage to chalk up 7.8 million profit despite challenging operating conditions (FMCO and container shortage).

 

 

 Geographical breakdown of revenue for Q2 result.

 

Comparing to immediate preceding quarter, revenue and profit also dropped.

 Prospect:

Demand for the products is definitely there but disrupted by pandemic. Company has bought a piece of land for expansion according to their 2019 annual report.

 

Risk

Shut down:

It is very clear that shutdown during FMCO has caused the revenue to drop. If not wrong operation is only allowed on 17^th August 2021, so there is 7 weeks shut down in Q3. Hence, Q3 result will not be favourable as well.

 

Raw material cost:

Certain raw materials like particle, chipboards and carton boxes are on the rise. Hence profit margin will be squeezed

 

Shipment cost and container shortage:

Shipment delay and high container cost. There are total of 18,010 containers ship out in 2020. The increase of freight cost will definitely impact the sales. However, it is not sure if their sales are on FOB or CIF basis. Global container shortage is still an issue to company.

 

Technical Analysis on Chart:

Price has been dropping since mid Nov 2020 and bottom at support level RM2.90. Price then move up to RM3.21.

 

Forecast EPS & price

Date	27 August 2021		Current Price	RM3.21
EPS
Quarter	Q1	Q2	Q3	Q4	Total
Forecast	6.79	4.36	2	5	18.15
Actual	6.79	4.36

 At time of writing, I own very small amount of LIIHEN shares and waiting to accumulate.