TA Research said that demand for furniture is expected to remain sluggish in the near-term due to the United States' weak housing market.
PETALING JAYA: Poh Huat Resources Holdings Bhd
’s near-term earnings outlook is expected to remain challenging, weighed by slower demand from the US market.
However, the furniture manufacturer’s solid balance sheet, with strong cash pile, is expected to help the group sail through the headwinds.
According to TA Research, the demand for furniture is expected to remain sluggish in the near-term due to the United States' weak housing market even though the country’s inflation rate has started to taper off.
TA Research downgraded Poh Huat to “hold” from “buy”, with a lower target price of RM1.33, compared with RM1.68 previously, after revising its earnings forecasts for Poh Huat and rolling forward the valuation base year to 2024.
It said that the revised target price was based on eight times 2024 estimated earnings.
TA Research revealed it had cut its earnings forecasts for Poh Huat by 34.4% for the financial year ending Oct 31, 2023 (FY23), 23.9% for FY24 and 23.5% for FY25 after factoring in lower utilisation rates for both the company’s Malaysia and Vietnam plants.
It noted that Poh Huat’s core net profit for the first half (1H23) at RM16.5mil, down 54% year-on-year (y-o-y), were below expectations. The softer earnings performance, in tandem with the 41.8% y-o-y decline in revenue to RM214.8mil for 1H23, was largely attributed to weaker demand from the US market as a result of lower household spending amid a high inflationary environment, TA Research said.
“Overall, we believe that the solid balance sheet with strong cash pile will help the group to sail through the near-term headwinds,” it said.
Poh Huat’s net cash position improved further to RM275.3mil, with zero borrowing, from RM241.3mil a quarter ago, it noted.
“The group will continue focusing on expanding its market share in North America amid the prolonged trade war between the United States and China,” Poh Huat said.
