POHUAT: Quarterly Profit Resilience Driven by Cost Controls, Analysts Rate “BUY”

Recent financial results indicate a mixed performance for the company, with a significant quarterly improvement driven by robust cost management, even as full-year earnings fell short of expectations amid a challenging market. Despite these headwinds, investment bank TA Securities has issued a “BUY” recommendation, setting a target price of RM0.25.

Performance Review

The company recorded a core profit of RM16.6 million for the full fiscal year 2025 (FY25), which came in below market expectations, accounting for 92.5% of the estimated full-year figure. On a year-on-year basis, FY25 core profit saw a substantial decline of 53.8%, with revenue also falling 12.8% to RM414.8 million. This downturn was largely attributed to weaker-than-expected demand from the US market following the imposition of tariffs, which subsequently led to softer sales orders from both its Malaysian and Vietnamese operations.

Despite the annual shortfall, the fourth quarter of FY25 (4QFY25) demonstrated a strong rebound. Core profit for the quarter surged by an impressive 238.4% quarter-on-quarter to RM4.4 million. This significant improvement occurred even as revenue experienced a 6.6% decline, primarily driven by effective cost management and a lower cost of sales. The group also declared a final dividend of 2.0 sen per share, bringing the year-to-date dividend to 8.0 sen per share. Additionally, a special dividend of 1.0 sen per share was announced, slated to be recognized in FY26.

Market Challenges and Operational Adjustments

The US furniture sector continues to grapple with uncertainties stemming from tariffs, which have negatively impacted the supply chain. In response to these market dynamics, the company experienced lower utilization rates across its Malaysian and Vietnamese operations. Proactive strategies are being implemented to mitigate these challenges. The company’s balance sheet remains robust, characterized by zero debt and a healthy net cash position of RM296.3 million, equivalent to RM1.06 per share.

Future Outlook and Investment Perspective

While near-term challenges persist, the outlook is cautiously optimistic. Potential future US interest rate cuts could stimulate housing market activity, thereby boosting furniture demand. The company is actively pursuing initiatives to diversify its revenue base by engaging new customers in other regions and is committed to enhancing cost efficiency through further automation and workforce rightsizing.

Although analysts have revised down FY26 and FY27 earnings forecasts by 23.3% and 16.4% respectively due to anticipated lower utilization rates, a projected net profit of RM39.0 million for FY28 signals a 7.1% earnings growth. TA Securities maintains an optimistic view on the stock, reiterating a “BUY” recommendation with a target price of RM0.25, representing a potential upside of 25.0% from its last traded price of RM0.20.