Poh Huat Resources Holdings Bhd
(Nov 7, RM1.44)
Maintain buy with a higher target price of RM1.71: The ongoing trade dispute between the US and China is turning Malaysian furniture manufacturers more competitive versus those in China.
Poh Huat Resources Holdings Bhd stands to benefit from this as it has good relationships with US buyers (around 90% of sales).
Poh Huat’s current forward orders run to March-April 2019.
The group has been updating and adjusting its product mix, mainly to meet the change in consumer preferences towards middle and affordable products from high-end products previously.
On top of that, at the Vietnam operations, where competition is intense due to the rising number of furniture makers, Poh Huat has been trying to introduce more unique and differentiated furniture products that other furniture makers are not able to copy, and which are helping to keep orders resilient.
Currently, the group is in talks with an Australian company that sells furniture products online.
The contribution from this venture is likely to be small. Nevertheless, if Poh Huat manages to purchase the Australian company, this could be the group’s first foray in tapping the Australian furniture market. — Affin Hwang Capital Research, Nov 7