PETALING JAYA: Poh Huat Resources Holdings Bhd has enough firm sales orders for delivery through April 2022 after it resumed full operations, both in the country and Vietnam. The group also managed to pass on the escalating materials cost to the customers via higher average selling prices (ASPs).

       It also intends to allocate up to RM10mil each year for machinery upgrading and automation to further improve productivity, said TA Securities Research.

       After the relaxation of movement restrictions by the governments, the research house said the group was clearing all the delayed orders. Demand from the United States for furniture products remained strong, thanks to the trade diversion due to the ongoing US-China trade war.

       TA Securities said based on trade data from the US Census Bureau, US furniture imports from China have been steadily declining while Malaysia and Vietnam are gaining the market share.

       In terms of the cost of production, the group’s management guided that prices of raw materials such as particle boards have increased due to robust demand from the furniture players. It subsequently revised the ASPs upwards to pass on the higher cost of materials to the customers.

       The group had also made a lot of advanced raw materials purchases last year in anticipation of a further increase in materials cost.

       In terms of wages, both Malaysia and Vietnam operations are expected to remain stable, it said. The group has also completed a new hostel for its workers in Malaysia.

       Subject to the final approval and issuance of the certificate of fitness from the relevant authorities, the workers are expected to move into the new hostel by the first half of this year.

       The group has also recently completed a new showroom in Serenia City, Selangor. The gallery is mainly for the group to display the latest furniture products for its prospective clients.

       The research house has maintained its financial year 2022 to 2024 earnings forecasts.

       It forecast Poh Huat’s net profit at RM56mil for 2022 and RM59mil for 2024, while the analysts’ consensus is RM54mil and RM60mil respectively.

       TA Securities also maintained a “buy’’ call on the stock with an unchanged target price of RM1.84 a share. This is based on the unchanged nine times current year 2022 earnings per share. The research house believed the worst is over for Poh Huat unless there is another lockdown due to the pandemic.