Poh Huat to see slow furniture demand from the United States

PETALING JAYA: While estimating US demand will decline for Poh Huat Resources Holdings BhdTA Research expects the furniture maker to benefit from the US-China trade dispute.

Poh Huat’s results for the year ended October 31, 2022 (FY22) were significantly better than the prior year, with net profit for FY22 up 160% year-on-year (yoy ) compared to FY21.

Its FY21 results were hurt by movement control orders (MCOs) as well as the greenback’s strengthening against the ringgit and Vietnamese dong.

TA Research said the stellar performance was due to strong earnings from its Malaysia and Vietnam operations, which operated at higher productivity.

“The strong earnings from its Malaysian operations were also partly due to the low base effect, given that it was hit by multiple phases of MCO a year ago,” the research unit said.

As it anticipates a gradual weakening of demand from the United States over the next two fiscal years, TA Research is cutting its earnings forecast for Poh Huat for FY23 and FY24 by 6.6% and 5%, respectively.

However, he expects earnings to grow again at a rate of 3.2% in FY25.

This is in line with the group’s own outlook for 2023, as it said in its filing with Bursa Malaysia, amid weakening consumption, demand for furniture has also moderated.

“US furniture imports have slowed in recent months as US importers liquidate overstocked positions.

“This trend is expected to continue as the slowdown in the US housing sector amid rising interest rates and rising costs of living will negatively impact furniture purchases for the foreseeable future.

“On the positive side, the resurgence of Covid cases in China and supply chain constraints will reaffirm Southeast Asia as an important sourcing region for US furniture importers,” Poh Huat said in a statement. the folder.

Similarly, Public Investment Bank Research had also predicted slowing demand earlier in the year amid rising interest rates, leading to a slowdown in the housing market and consumer discretionary spending.

With earnings revised in the near term, TA Research still maintains a “buy” call on the furniture company, albeit at a lower target price of RM1.68 from the RM1.79 it previously forecast.

UOB Kay Hian Research, in its note, also recommended Poh Huat as a “buy”, with a target price of RM1.49.

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