KUALA LUMPUR: Poh Huat Resources Holdings Bhd's sales orders are expected to remain flat as the furniture industry will continue to be challenging due to a slowdown in the US market.
Despite strong earnings in the second quarter of the financial year 2024 (2QFY24), Public Investment Bank Bhd (PublicInvest) said it continues to take a cautious stance on the furniture manufacturer as export orders slowed typically during non-festival season, leading to a sequential decline in utilisation rate.
"We believe the furniture industry will continue to be challenging going forward as the US market is experiencing a slowdown, with importers and retailers clearing excess inventories.
"Additionally, the US Federal Reserve's recent decision to temper expectations of future rate cuts is likely to result in prolonged elevated mortgage rates. Hence, we anticipate sales orders to remain flat going forward," it added.
According to PublicInvest, Poh Huat's revenue has dropped 17 per cent quarter-on-quarter (QoQ), mainly due to a slowdown in sales volume during non-festival seasons.
Therefore, it is assumed that the utilization rate will remain at about 60 to 70 per cent in FY24.
In 2QFY24, the company's headline net profit increased by 70 per cent year-over-year (YoY) to RM7.2 million, mainly attributed to the uptick in orders from US customers for office segment products as US workers are progressively returning to the office after working remotely.
Meanwhile, it's revenue increased 14 per cent YoY to RM108.3 million in 2QFY24, while its operation in Malaysia improved 36 per cent YoY offset by a drop of 10 per cent in its Vietnam operation as customers cleared off excess inventories.
PublicInvest said the results were within its expectations at 46 per cent but below market expectations at 39 per cent.
The research firm maintained its FY24–26 earnings forecasts on Poh Huat and underperformed rating with a higher target price of RM1.16 as it rolled over valuation base year to calendar year 2025 based on an 8 times price-to-earnings ratio (PER) at 5-year mean.