Industry Comparison – Wooden Furniture

Sector                 : Consumer Products & Services

Sub Sector         : Household Goods

As of 30th  March 2020 there are 14 company listed in Bursa Main Market and ACE market which are doing business in manufacturing and trading of wooden furniture. They are:

1) EUROSP(7094) – EUROSPAN HOLDING BERHAD

2) FIHB(8605) – FEDERAL INTERNATIONAL HOLDINGS BERHAD

3) HOMERITZ(5160) – HOMERITZ CORPORATION BERHAD

4) JAYCORP(7152) – JAYCORP BERHAD

5) LATITUD(7006) – LATITUDE TREE HOLDINGS BERHAD

6) LIIHEN(7089) – LII HEN INDUSTRIES BHD

7) POHUAT(7088) – POH HUAT RESOURCES HOLDINGS BERHAD

8) SERNKOU(7180) – SERN KOU RESOURCES BERHAD

9) SHH(7142) – SHH RESOURCES HOLDINGS BERHAD

10) SNC (7943) – SAND NISKO CAPITAL BERHAD

11) SWSCAP (7186) – SWS CAPITAL BERHAD

12) SYF (7082) – SYF RESOURCES BERHAD

13) TAFI (7211) – TAFI INDUSTRIES BERHAD

14) WEGMANS (0197) – WEGMANS HOLDINGS BERHAD

64 % of the companies listed above have their manufacturing plant in Johor. While JAYCORP, LATITUD and POHUAT also owning manufacturing plant outside Malaysia which are in Indonesia (JAYCORP), Thailand (LATITUD) and Vietnam (LATTUD and POHUAT).

Competiveness

Marketshares is an importance indicator to determine the competitiveness of the company. Total revenue make from manufacturing and trading of wooden furniture for the year 2018 is RM 3,218,703,904.

COMPANY	REVENUE (FURNITURE) 2018 (RM)	MARKET SHARE (%)
EUROSP (7094)	60,241,427	1.87
FIHB (8605)	26,320,398	0.82
HOMERITZ (5160)	166,445,092	5.17
JAYCORP (7152)	221,876,000	6.98
LATITUD (7006)	777,100,000	24.14
LIIHEN (7089)	802,990,966	24.95
POHUAT (7088)	621,925,519	19.32
SERNKOU (7180)	58,411,210	1.81
SHH (7142)	119,082,113	3.70
SNC (7943)	2,979,611	0.09
SWSCAP (7186)	52,286,788	1.62
SYF (7082)	191,163,000	5.94
TAFI (7211)	22,896,941	0.71
WEGMANS (0197)	94,984,839	2.95

Top three companies in term of market shares are LIIHEN (24.95 %), LATITUD (24.14%) and POHUAT (19.32 %). This three companies had combined market shares of 68.41 %.

Operational

For operational, operating income of the companies had been review. Operating income determine how much the companies’ revenue had turn into profit after reduction cost of operating expense .

Besides operating income, operating margin ratio is also calculated. Companies with higher operating margin ratio have more probability to survive in today financial crisis. The median operating margin ratio for this group of companies for 2018 is 6.29.

COMPANY	2018 OPERATING INCOME (RM)	2018 OPERATING MARGIN RATIO
EUROSP (7094)	(1,609,950)	- 2.67
FIHB (8605)	2,351,523	8.93
HOMERITZ (5160)	25,418,893	15.27
JAYCORP (7152)	12,546,000	5.65
LATITUD (7006)	53,805,000	6.92
LIIHEN (7089)	77,386,074	9.64
POHUAT (7088)	57,529,013	9.25
SERNKOU (7180)	(1,721,794)	-2.95
SHH (7142)	(11,763,933)	-9.88
SNC (7943)	(1,463,316)	-49.11
SWSCAP (7186)	3,832,787	7.33
SYF (7082)	130,000	0.07
TAFI (7211)	(4,453,930)	-19.45
WEGMANS (0197)	12,911,017	13.59

As value investor, companies with negative operating income are a bit risky to invest in hence the five companies; EUROSP, SERNKOU, SHH, SNC and TAFI have disqualify for further company evaluation.

Companies with high operating margin mean there are still pretty of allowance to lower down the sale price of their products to make their product competitive. There are HOMERITZ (15.27), WEGMANS (13.59) and LIIHEN (9.64).

Sustainability

For the sustainability of the business, debt of the companies is being review. There are two criteria to look at interest coverage ratio which is used to determine how easy the companies able to pay off the interest of outstanding debt and debt ratio. The median debt ratio for 2018 is 0.32.

COMPANY	2018 INTEREST COVERAGE RATIO	2018 DEBT RATIO
EUROSP (7094)	-24.35	0.19
FIHB (8605)	11.25	0.74
HOMERITZ (5160)	No Financial Cost	0.11
JAYCORP (7152)	14.22	0.19
LATITUD (7006)	No Financial Cost	0.53
LIIHEN (7089)	61.05	0.30
POHUAT (7088)	45.66	0.26
SERNKOU (7180)	-2.25	0.44
SHH (7142)	-29.78	0.22
SNC (7943)	No Financial Cost	0.72
SWSCAP (7186)	1.20	0.47
SYF (7082)	0.02	0.35
TAFI (7211)	-27.97	0.16
WEGMANS (0197)	9.89	0.40

There are three companies with no financial cost which mean they are either no debt or the debt are interest free. The companies are HOMERITZ, LATITUD and SNC. Besides that company with high interest coverage ratio mean they are able easily to pay off their debt with their operating income.

The top three companies for sustainability are either had no financial cost or high interest coverage ratio and have low debt ratio. The companies are HOMERITZ, POHUAT and LIIHEN.

Summary

In summary a point is given to each company to evaluated each company competiveness, operational and sustainability. Points given are as follows:

Competitiveness

Criteria	Point
Greater than 20 % Market Shares	5
15.01 % - 20.00 % Market shares	4
10.01 % - 15.00 % Market shares	3
5.01 % - 10.00 % Market shares	2
1.00 % - 5.00 % Market shares	1
Less than 1%	0

Operational

Criteria	Point
Greater than 10  Operating Margin	5
8.01 – 10.00 Operating Margin	4
5.01 – 8.00 Operating Margin	3
3.01 - 5.00 Operating Margin	2
1.01 - 3.00  Operating Margin	1
0.00 – 1.00 Operating Margin	0
Less than 0	Disqualified

Sustainability

Criteria	Point
No Financial Cost	2
Greater than 20 Interest Coverage Ratio	1
Less than 20 Interest Coverage Ratio	0

Criteria	Point
Less than 0.15	3
0.15 – 0.35	2
0.36 – 0.50	1
Greater than 0.50	0

COMPANY	Competitiveness	Operational	Sustainability	Total
EUROSP (7094)	1	DIS	2	DIS
FIHB (8605)	0	4	0	4
HOMERITZ (5160)	2	5	5	12
JAYCORP (7152)	2	3	2	7
LATITUD  (7006)	5	3	2	10
LIIHEN (7089)	5	4	3	12
POHUAT (7088)	4	4	3	11
SERNKOU (7180)	1	DIS	1	DIS
SHH (7142)	1	DIS	2	DIS
SNC (7943)	1	DIS	3	DIS
SWSCAP (7186)	0	3	1	4
SYF (7082)	2	0	2	4
TAFI (7211)	0	DIS	2	DIS
WEGMANS (0197)	1	5	1	7

From the evaluation above, HOMERITZ (12 points), LIIHEN (12 points), POHUAT (11 points) and LATITUD (10 points) is qualified for further analysis.

Summary of Stock Reviews

Summary of Industry Comparison