My Business School: Malaysia Furniture

Wednesday, May 4, 2022

Malaysia Furniture - Recovery or Mini Boom?

Malaysia Furniture – Recovery or Mini Boom?

Malaysia furniture and timber listed companies are quite a few in Bursa. Most of the companies are export oriented. With strengthening of US Dollar and recovery of our manufacturing sector, it is time to look at this sector and some companies as a whole.

According to Malaysia Timber Council, Malaysia timber export in 2021 is valued at RM22.744 billion. In particular wood furniture has a clear trend of growing mainly due to US-China trade dispute since 2019.

Malaysia Timber Council : http://mtc.com.my/resources-TradeInfo.php

Malaysia Timber Export in MYR Million

USA has become the largest export market for Malaysia furniture makers since 2019 US-China trade war.

Factors affecting the industry:

Raw material – rubberwood
Raw material – adhesive (UF) – related to crude oil & more to fibreboard players.
Labour cost and shortage – Minimum wages of MYR 1,500 impact.
Shipping cost – related to crude oil and pandemic lockdown
USD-MYR currency

UREA Price Chart

Positive Signs:

Export increase in the first two months of 2022 – refer to Malaysia Timber Council
China lockdown which resulted in severe port congestion
USD-MYR favourable for exporters although not much
USA-China trade war, USA-Canada trade war, Ukraine-Russa conflict (Russia banning export to West)
Easing of labour shortage in Malaysia

Analysis by HLIB is upbeat on timber counter.

https://www.klsescreener.com/v2/news/view/973553/boom-in-wood-manufacturing-sector

Malaysia Export increase – Jan-Feb 2022

Quick Summary

For furniture sector, I like Pohuat and Liihen for the consistence dividen payout. Latitud and Pohuat have overseas operations which are not affected so much of the minimum wages hike. Pohuat, Liihen and Latitude have 90% export to USA market. Interesting to know that most furniture exporters are cash rich companies.

Another set players are particle board manufacturers such as Hevea, Evergreen, MIECO and Focus lumber. Hevea is cash rich company and export to premium market like Japan. Its share price still is still a lagger compared to Evergreen and MIECO. Focus lumber is the only veneer supplier to USA market and commanding higher profit margin. It’s share price has appreciated a lot. I prefer Hevea as it is still a lagger.

Malaysia is top 10 exporter according to MFI(not sure if this true). See below