Monday, 30 March 2020

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
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9 comments:

  1. yangsin21 April 2020 at 05:54

    很好的分析， 谢谢。 thanks your analysis

    ReplyDelete
  2. Tan Wee Tiong24 April 2020 at 04:28

    There are a few local funiture player but listed overseas.

    ReplyDelete
  3. CheahSweeKuan31 May 2020 at 19:58

    what you all think about their sales in view of the drop in job market in the US due to the covid pandemic?. Will their sales be affected?

    ReplyDelete
    Replies
    1. IVKLSE6 June 2020 at 20:21

      The sales definitely would affect due to the Convid 19 pandemic especially from the US and EU region.

      As furniture is not the main priority to survive the sales would not pick back up as fast as other consumable good such as ediable oil. People would delay their purchase of furniture and rather keep more cash.

      Besides that furniture industries is labor intensive and highly dependent on foreign worker which Malaysia government had strict Standard of Procedure (SOP) for foreign worker which would increase the operation cost.

      Outlook for furniture industry for year 2020 is negative.

      Delete
  4. GaryGan16 October 2020 at 03:04

    it's interesting to read, and pretty much close to the facts they are facing now, except for saying business will be done during pandemic which the facts are the other way round, even to include some smaller players, are having huge orders in coming 6 months.. big challenge is material cost up, but most likely will be able to pass by to their market and should enjoy bigger premium later on.

    ReplyDelete
    Replies
    1. IVKLSE28 October 2020 at 20:26

      yes GaryGan, you are right did not expect order are coming from US due to the trade war between China and US and more people are working from home in US. Need new office furniture at home.

      Well eye on this coming US election, in my opinion the trade war would be ending after the election.

      Delete
  5. gin tonic7 November 2020 at 07:35

    may i know where did you get the market share data?

    ReplyDelete
  6. IVKLSE8 November 2020 at 04:39

    Hi Gin Tonic, I compare single company revenue to the total revenue earn from selling off furniture in 2018. I analysed in this blog to get the estimated market share of the single company.

    Example:
    Revenue for POHUAT in 2018 (A) - RM 621,925,519
    Total Revenue Earn by selling furniture (2018) (B)- RM 3,218,703,904
    Market Share = A / B = RM 621,925,519 / RM 3,218,703,904 = 19.32 %

    This is how I calculated the market share in this blog with the assumption that the large company are public listed in Malaysia. There might be some company producing furniture which are not listed which the revenue is not taken into account.

    All revenue are base on 2018 annual report. The market might change in 2019 annual report.

    ReplyDelete
  7. Free Online Earning6 November 2021 at 07:18

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    ReplyDelete

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