PETALING JAYA: Furniture maker Poh Huat Resources Holdings Bhd still has the opportunity to expand its market share in North America, as a result of the prolonged trade war between the United States and China, says TA Research.
This was despite the demand for furniture from the US market slowing down due to the weak housing market, the research house said in its latest report.
TA Research noted the group’s current strong cash pile will also help it sail through all the near-term headwinds.
In reviewing the group’s latest first quarter of financial year 2023 (1Q23) results, the research house said excluding a foreign exchange loss of RM9.7mil and gain on disposal of unquoted investments of RM1.8mil, Poh Huat’s core profit of RM14.7mil came in within expectations, accounting for 25.3% and 25.6% of its and consensus full-year estimates.
Year-on-year, the 1Q23 core profit dropped 2.5% to RM14.7mil as revenue fell 34.7% to RM119.5mil.
TA Research noted the weaker earnings performance was mainly attributed to lower demand from the United States as a result of weaker consumer spending power amid a high inflationary environment.
“Besides, the shipment was also affected by quieter production days during the Chinese New Year (CNY) holiday in January 2023.
“Against this backdrop, the group improved its gross margins by 2.8% to 22.3%, thanks to better utilisation of raw materials and lower direct labour costs,” added the research house.
Meanwhile, the group’s quarter-on-quarter 1Q23 core profit fell 31.5% to RM14.7mil on the back of a lower revenue of RM119.5mil, as the weaker earnings were largely dragged by lower sales and shorter production days during the CNY festival.
On a positive note, Poh Huat’s net cash position has improved further to RM241.3mil from RM188.4mil a quarter ago.
TA Research has maintained the group’s FY23-FY25 earnings forecasts.
It also maintained a “buy” call on the stock with a target price of RM1.68.