KUALA LUMPUR: Affin Hwang Capital Research has initiated coverage on Poh Huat Resources Holdings Bhd
with a Buy call and a 12-month target price of RM2.39, based on a FY18E PER of 9x.
Poh Huat is a major home and office furniture manufacturer in Asean that has recently expanded into Australia. Affin Hwang Research views this development as positive as it will to increase its customer base, provide a new source of income and reduce its independence on the US market.
Poh Huat's US exports have been on the rise, comprising 91% of sales in FY16 versus 85% in FY13. Affin Hwang Research expects this trend to continue with the government ban on the export of rubberwood ensuring sufficient supply for manufacturing in Malaysia.
The furniture maker's revenue growth is driven by strong demand and the ability to produce high-quality products.
"We believe growth in earnings will be underpinned by higher shipment volumes given the strong demand, launch of new models, better ASPs of its products and rising factory efficiency. Efforts to continuously introduce new furniture lines, allow Poh Huat to adjust its pricing strategy to reflect current cost of production and market conditions," said Affin Hwang Research.
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