PETALING JAYA: Home furniture manufacturer Homeritz
Corp Bhd’s earnings will likely continue to be affected by lower home sales in the North America and European Union regions as mortgage rates remain elevated, says Hong Leong Investment Bank (HLIB) Research.
Despite the Federal Reserve likely ending its interest rate hikes in the third quarter or fourth quarter of 2023, the research house said: “There remains uncertainty whether the United States might enter into a recession in the later part of this year.”
HLIB Research noted should this happen, home sales are likely to remain muted and furniture demand as well.
Homeritz posted a core profit after-tax and minority interest of RM5.2mil in the third quarter of 2023 (3Q23), down 1.8% quarter-on-quarter and falling 39.3% year-on-year (y-o-y).
“This brought the nine-month financial year 2023 sum to RM16.5mil, dropping 35.8% y-o-y, which was below HLIB Research’s forecast but in line with consensus expectations at 69% and 74.2%, respectively,” it noted.
In view of the results shortfall, HLIB Research has cut its financial year 2023 (FY23), FY24 and FY25 forecasts by 5.4%, 11.2% and 13.5%, respectively, to account for a lower sales volume.
The research house also maintained a “sell” call on the stock with a slightly lower target price (TP) of 41 sen from 42 sen previously.
PublicInvest Research, meanwhile, remained cautious on the group’s near-term outlook due to the prevailing elevated interest rate environment, which has negatively impacted the property market and led to a decline in furniture demand.
But the favourable exchange rate and the group’s initiatives to participate in home exhibitions should help secure more orders, it said. It keeps its earnings forecast for FY23-FY25 unchanged and reiterated its “neutral” call on Homeritz with a TP of 48 sen.
