PETALING JAYA: Poh Huat Resources Holdings Bhd
could face a slowdown in sales orders due to higher tariffs, thereby affecting its earnings as the US market accounts for over 90% of its export revenue.
However, there is a small possibility that wooden furniture may be exempted from tariffs under the ongoing Section 232 investigations, said TA Research.
The US imposition of higher tariffs could reduce demand from US buyers due to increased costs, potentially leading to order cancellations or volume reductions.
The research house said Poh Huat may face some margin pressure, as it might need to absorb part of the tariff burden or offer discounts to maintain competitiveness.
Given the uncertainties arising from the trade war, TA Research has cut its utilisation rate assumptions for the company’s operations in Vietnam from 72%, 75% and 78%, respectively, for financial year 2025 (FY25), FY26 and FY27, to 50%, 60% and 75%, respectively.
Consequently, earnings forecasts for FY25, FY26 and FY27 were cut by 32.4%, 16% and 2.6%, respectively.
Thus, TA Research lowered the target price from RM1.25 per share to RM1.08, based on seven times 2026 earnings per share potential.
It downgraded the stock from “hold” to “sell” as it foresees uncertainties ahead and potential earnings risks for the furniture sector.
Nevertheless, the research house said the group should be able to navigate through the headwinds, thanks to its solid balance sheet with zero borrowings.
Based on the company’s latest first-quarter results, Poh Huat is in a net cash position of RM288.7mil or RM1.04 a share.
TA Research expects its Malaysian operations to be less impacted compared to the operations in Vietnam, given that the tariff imposed on Malaysia is relatively lower than the top furniture-exporting countries, such as China and Vietnam, which together account for more than 50% of US furniture imports.
On March 1, 2025, US President Donald Trump issued an executive order instructing government agencies to initiate a Section 232 investigation into imports of timber, lumber and derivative products, including furniture, to assess the impact on national security.
Poh Huat is still in the process of seeking clarification from US customers, said TA Research.
The group will transfer some sales orders from Vietnam to its Malaysian operations to reduce tariff exposure.
Additionally, it will actively seek to diversify its revenue base to other regions, such as Europe, Asia and the Middle East.
