KUALA LUMPUR: Hong Leong Investment Bank Research has maintained its Buy call on Lii Hen Industries Bhd
with an unchanged target price of RM5.04 following the fire that broke out at the premises of the company's subsidiary.
According to HLIB Research, the fire destroyed four out of eight blocks of production lines, the conveyor system, spraying and wood making machines as well as inventories.
While the full impact of the incident is yet to be determined, Lii Hen guided that losses could be fully covered by insurance coverage.
The fire would affect 5% to 10% of November's total production and management is confident full operations will resume within a month.
"Recall in 2014, a similar fire incident happened in Lii Hen’s main factory and operation was resumed back to normal within three days, by renting new premises and outsourcing to more sub-contractors. Hence, we opine that Lii Hen would be able to manage this fire incident with minimal struggle," said HLIB Research.
The research firm has cut its FY17 net profit by 5.1% to account for an assumption of 2% lower production volume.
"We still like Lii Hen due to its strong balance sheet (net cash per share 53.8 sen as at 30 June 17), high dividend payout (dividend yield of 6.4%) and its ongoing effort to adopt effective cost management.
"Moreover, we expect stable growth in the global furniture market due to growing real estate industry and increasing number of global retail stores."
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