KUALA LUMPUR: Affin Hwang Capital has terminated coverage on Jaycorp Bhd due to a reallocation of resources and given the low trading liquidity.
Jaycorp's nine-month core profit fell by 36 per cent year-on-year (YoY) to RM12.6 million, which came in within Affin Hwang's expectations at 76 per cent of full-year forecast.
For the third quarter ended April 30, 2024 (Q3FY24), its revenue dropped to RM48.6 million, dragged down by its key furniture segment due to the disposal of a subsidiary in Q3Fy24 as well as decreased demand in export and local markets.
"The furniture segment has been the highest earnings contributor historically, accounting for more than 60 per cent of total group earnings.
"Tracking a lower revenue, its core profit further declined by 41 per cent YoY to RM3.4 million, primarily driven by higher operating costs and a higher tax rate due to the increase in non-deductible expenses," said Affin Hwang.
Sequentially, Jaycorp's Q3FY24 sales declined 16 per cent quarter-on-quarter to RM48.6 million, which was again dragged down by the weak furniture segment (-19 per cent quarter-on-quarter) due to weak demand in both export and local markets.
Affin Hwang's last rating on the stock was a "Sell" a target price of 52 sen.
"The near-term outlook for the company remains challenging, particularly for its key furniture business, as orders from both export and local markets are expected to remain sluggish," it said.