Stock Review – HOMERITZ (5160) (HOMERITZ CORPORATION BERHAD) -2

Bursa Malaysia - 5160

Bloomberg - HMCB:MK
Yahoo - 5160 .kl
Webpage - http://www.homeritzcorp.com/

Company Profile

HOMERITZ engaged in the design, manufacture and sale of upholstery furniture products in Malaysia. HOMERITZ primary undertake Original Design Manufacturing (“ODM”) and Original Equipment Manufacturing (“OEM”). HOMERITZ had its own brand which is “Eritz”.

1) Geographical Information

HOMERITZ is operated in four major locations which are:

1) Asia and Oceania (Excluding Malaysia) – 60.01 % of 2018 revenue

2) Americas and European Countries – 36.05 % of 2018 revenue

3) Malaysia – 2.56 % of 2018 revenue

4) Africa and Middle East – 1.37 % of 2018 revenue

2) Major Customer

HOMERITZ had three major customer with revenue equal to or more than 10% of the Group revenue:

1) Customer A – 14.05 % of 2018 revenue

2) Customer B – 12.73 % of 2018 revenue

3) Customer C – 11.78 % of 2018 revenue

CONS:

è HOMRITZ had three major customers which contributed 38.56 % of the 2018 revenue

Financial Statement

Trade receivables for 2018 had increase from RM 8,449,687 (2017) to RM 11,288,608 (2018) by RM 2,838,921 or 33.60 %. However the trade receivable pass due had significant decrease from RM 403,660 (2017) to RM 1,949 (2018) 99.52 % decrease.

Ficed Deposit with licensed banks had increase from RM 29,000,000 (2017) to RM 34,727,346 (2018), 19.75 % increase. Besides that interest rate range also increase from 3.70 % - 3.90 % (2017) to 3.50 % - 4.28 % (2018).

PROS:

è Almost no trade receivable had past due è Interest range in licensed bank increase to 3.50% - 4.28 %

CONS:

è Significant drop (99.52 %) of the trade receivable had past due

There is an increase in trade payable from RM 4,254,285 (2017) to RM 7,148,471 (2018), 68.03 % increase.

CONS:

è 68.03 % increase in trade payables account.

Financial Ratio

Description	2018	2017	Different
Gross Profit Margin	0.44	0.48	-0.04
Net Profit Margin	0.13	0.18	-0.05
Interest Coverage Ratio	N/A	N/A	N/A
Effective Tax	0.23	0.21	+0.27

Warrant

At 5 December 2018 HOMERITZ had 49,990,000 warrants unexercised with the exercised price of the warrants to be RM 0.92 which are higher than stock price, RM 0.595 on 12/4/2019.

PROS:

è The Warrant is out of money hence does not consider in the stock price

Dividend and Bonus Issued for the past five year

HOMERITZ had constant dividend for the past five year from 2014 – 2018 with the average dividend of RM 0.0402 included adjustment of bonus issued 1:2 on 3 July 2015 with the dividend yield of 6.76% base on HOMERITZ stock price of RM 0.595 on 12/4/2019.

PROS: è HOMERITZ had dividend yield of 6.76% for the past five year which is higher than fixed deposit 3.15%.

Market Research

HongLeong InvestmentBank (24 January 2019)

Price Target : RM 0.82

Estimated Price

IVKLS Price : RM 0.66

Peers

1)   LIIHEN

2)   LATITUD

3)   POHUAT

4)   WEGMAS

5)   SYF

6)   JAYCORP

7)   SWCAP

8)   DPS

9)   HHGROUP

10) SHH

Industry Comparison - Furniture

Summary of Stock Reviews