HOMERIZ (5160) 家丽资机构 HOMERITZ CORP BHD 62仙投资
－Homeritz Corp Bhd是一家投资控股公司，设计，制造和销售室内装饰家具产品。 该公司提供的室内装饰家具产品包括皮革和织物沙发，餐椅和床架。 和Eritz品牌的生活用家具产品。 它还参与房地产投资活动； 以及家具和家具零件的设计，制造和销售。 该公司的主要收入来自亚太市场。
Maintain BUY, TP: RM0.72. After rolling over our valuation year to FY21 and adjusting for changes in earnings our TP falls from RM0.76 to RM0.72 pegged to an unchanged 10x PE multiple. We continue to like Homeritz due to healthy net cash per share per share of RM0.27
In my previous post, I made some highlights on the Malaysian furniture industry. In this article, I would analyse the two furniture companies which I believe are well positioned to ride out this economic uncertainty. To be honest, there are many other companies to analyze within this industry and I may have only analyzed a small portion of it. Here are the list of companies that I have gone through:
- Lii Hen
- Jay Corp
- Poh Huat
I am sure that there are some I have missed out on but among these, I believe Lii Hen and Homeritz are worth considering. The table below is a summary of what my analysis indicates.
Analyzing the two companies was not simple, both companies had different attractive points. If you noticed, Lii Hen has many characteristics of a good company (good growth & strong cash position) but no investment should ever be bought based on good growth alone. The PRICE we pay for the investment is equally important and Lii Hen may be selling at a discount.
Next up, we have Homeritz. The company experienced practically zero growth (actual: 3%) but it has been enjoying remarkable profit margins. Among the analyzed companies, Homeritz has the highest profit margins and the only company with double digits (average profit margin = 16.7%). Moreover, the cash position in Homeritz was equal to RM 0.27 per share! If you would refer to the table below, you’d see that Homertiz has a cash position of 82 million while the company’s market capitalization is 142 million (the cash is more than half its value now!)
In all aspects except debt, Lii Hen shows promising figures. The revenue and profit has been growing at a CAGR of 14%. The cash position and working capital has been growing steadily as well. However, I do not believe that Lii Hen’s 14% growth rate is sustainable. Assuming that the 14% growth rate is maintained, Lii Hen’s revenue would double to RM 1.67 billion by 2024. The recent slowdown and pandemic would drastically reduce furniture sales. I believe the future growth may fall between 3% to 5%.
Homeritz has been stagnant with its growth but it does make predicting it’s future earnings relatively simple. Moreover, the significantly higher profit margins enjoyed by Homeritz would suggest its products are within the premium product range and enjoys an above average profit. Refer to the chart below for Lii Hen’s and Homeritz’s profit margins in comparison to industrial averages. As you can see, Homeritz’s profit margin is between 10% to 20% while Lii Hen’s is between 4% to 12%. However, the industrial average is only 2.4%.
When it comes to branding, I prefer Homeritz as the company markets its products under one brand name, Eritz. Although, the company is currently in the ODM business, I believe that the company can make the switch from ODM to OBM with its existing Eritz brand.
Lii Hen has yet to market its products under one brand name. As mentioned in my previous post. The move towards an OBM model would benefit the company in terms of higher profit margins and Homeritz’s significantly higher profit margins with its Eritz branding may be a key reason for its success.
As Lii Hen grows, the business would eventually require less capital expenditures and would translate to potentially higher dividend returns. However the lack of a branding is regrettable. Based on my estimates, the company is worth between RM 2.50 to RM 3.20. The current price may provide a 20% margin of safety.
Homeritz on the other hand has a cash position which is worth RM 0.27 while trading at RM 0.48. Moreover, assuming that the business remains constant without growth, the company is worth RM 0.65 to RM 0.77. The current price may provide a 25% margin of safety.
I already own shares of Homeritz and am looking towards puchasing Lii Hen. Therefore, my analysis would be biased.