Fundamental Pick: POHUAT (7088)
Poh Huat Resources Holdings Berhad is a Malaysia-based investment holding company. The Company is engaged in manufacturing furniture products. The Company operates through furniture industry segment. The Company operates in South Africa, Vietnam and Malaysia.
Adjusted EPS for Poh Huat has seen healthy growth year-on-yeat as seen in figure below:
Pohuat’s net profit has been growing steadily over the years, thanks to weakening Ringgit and the improvement in the US housing market. As a labour dependent industry, Pohuat has mitigated the reliance on foreign labours by setting up factories in Vietnam which has ample supply of man power to support its manufacturing. Vietnam has accounted for about 70% of its production at this point in time.
Poh Huat has maintained positive cash flow from operating activities and have remarkable cash reserve to meet its growth needs.
Here are the key ratios for Poh Huat based on financial year 2015 results:
- Current Ratio = 1.58 (High ability of paying off its current debts)
- Liability to Equity Ratio = 0.6 (Healthy liability level)
- ROE = 20% (pretty good based on my criteria of 15% minimum ROE)
- Interest cover of 20.69x which indicates that it has good capacity for future borrowing
Poh Huat share price has gone up 8% year-on-year to RM1.85 today. Based on its unaudited result announced 22-Dec-16, 2016 was another year of increased profit. The outlook is looking good for Poh Huat and I have a fair value of RM2.30 for it.
Disclaimer: None of the strategies, stocks or information discussed or presented are financial or trading advice or recommendations. The author assumes no liability including for errors and omissions. Everything presented are the author’s ideas and opinions only. The author may or may not at any time be holding securities discussed. Trade at your own risk.