This article first appeared in The Edge Financial Daily on July 31, 2018
Poh Huat Resources Holdings Bhd
(July 30, RM1.46)
Maintain buy with an unchanged target price of RM1.64: Strong demand for Poh Huat Resources Holdings Bhd’s furniture products would be underpinned by: 1) an improvement in consumer sentiment, 2) an increase in demand for furniture coming from countries like the US as economic growth strengthens, and 3) rising number of housing starts. On top of this, Poh Huat refreshes its product range to sustain its strong orders.
Manufacturing costs have increased mainly due to rising raw material and labour costs.
This coupled with the strengthening of the ringgit versus the US dollar has affected margins.
We expect Poh Huat’s profit before tax margin to weaken to 8.5% in FY18 from 10.9% in FY17.
Poh Huat’s earnings are affected by the movement of the ringgit against the dollar due to its dollar-denominated sales.
Based on our sensitivity analysis, a 5% to 20% movement in the ringgit could affect earnings per share by 3%-14% for FY18-FY20. — Affin Hwang Capital, July 30