Friday, 22 September 2017

Stock Review – LIIHEN (7089) (LIIHEN INDUSTRIES BHD)


image source from Big Chart Marketplace

image source from Big Chart Marketplace
Bursa Malaysia - 7089
Bloomberg - LHI:MK
Yahoo - 7089 .kl

Webpage - http://liihenfurniture.com/

Company Profile

LIIHEN is engaged in manufacturing furniture product such as Bedroom sets, Office furniture, and Dinning sets.

1) Customer Information :

LIIHEN had their products sell in one major country which is United State, 75.50 % of total 2016 revenue. In Malaysia, LIIHEN only sell 9.77 % of the total revenue.

Besides that, LIIHEN consists of three major customers which combined revenue of 37.75% of the total 2016 revenue. All the three major customers contribute less than 20% of the total revenue which is good because LIIHEN revenue does not depend on the major custormers.

PROS:
è LIIHEN consists three major customers contribute revenue more than 10% but less than 20%.

CONS:
è LIIHEN selling most of their product in US which means there are highly dependent on the economy and currency of US.

2) Products:

LIIHEN is mainly focus on manufacturing furniture. LIIHEN products are:
1) Bedroom set – 83.06 %
2)  Office furniture – 6.51 %
3)  Dinning sets – 6.49 %
4)  Kiln Drying – 3.35 %
5)  Upholstery – 0.58 %

Most of LIIHEN furniture (94.97 %) are export to other country.
In 22 February 2016, LIIHEN had receive letter from the local state authority to exclude 3,037 hectares out of 3,473 hectares (87.45 %) from the rubber tree planting programme.

PROS:
è LIIHEN is focus on exporting business (94.97 %) export to other country.

CONS:
è 87.45 % of reserved land which previous given the right for the rubber tree planting programme had been took back by the local state authority.


Financial Statement



From 2016 Annual Report, LIIHEN consists of RM 522,565 of intangible assets which incurred in connection with the lease of right to use approximately 3,473 hectares of permanent reserve forest land in Johor for planting and cultivation of rubber trees. The local state authority has the right to take back the land anytime to exclude from the rubber trees planting programme which what they did on 22 February 2016 to exclude 3,037 hectares out of 3473 hectares from the rubber trees planting programme.

Although the account receivable had increase from RM 41,304,576 in 2015 to RM 57,896,182 in 2016, the account receivable that had been past due had increase from RM 6,680,081 in 2015 to RM 11,634,906 in 2016.

LIIHEN cash and bank balance had increase from RM120,506,396 in 2015 to RM 133,994,519 in 2016.

PROS:
è Cash and bank balance in 2016 had increase by 11.19 %

CONS:
è RM 522,565 of the asset is intangible assets which can be impaired anytime.
è Account receivable that past due had increase by 74.17 % compare to account receivable which only increase by 40.17 %


LIIHEN loan and borrowing had increase from RM 30,682,598 in 2015 to RM 37,298,934 in 2016.

CONS:
è Loan and borrowing had increase by 21.56 %

Dividend and Bonus Issued for the past five year

LIIHEN had constant dividend for the past five year from 2012 – 2016 with the average dividend of RM 0.173 per year which dividend yield of 4.73%.

PROS:
è LIIHEN had average dividend yield of 4.73 % over the 5 year period which is higher than fix deposit


Market Research

Hong Leong InvestmentBank (19 September 2017)
Price Target : 5.04
  • Malaysia’s furniture exports to grow further as China (the world largest furniture exporter) reported its first decline in furniture exports in 2016 due to shortage of raw materials.
  • Furniture demand in US had potential surge due to hurricane. Hurricane Harvey (which destroyed about 200,000 homes in August 2017) might boost LIIHEN export to US.
  • On July 2017, the government had ban the export of rubber wood to ease the shortage of rubberwood in Malaysia