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Singapore Investment


 Is  WEGMANS 0197 WEGMANS HOLDINGS BERHADs back on investors' radar?

Wegmans Holdings Bhd is starting to gain momentum, surging 22.2% to 22 sen on June 23.

Ths is pretty encouraging after touching its 52-week low of 15 sen about a month ago.

Wegmans warrants were also actively traded on June 23, closing 12.5% higher at 4.5 sen.

Are investors confident that the furniture maker is on an exciting upward trend?

It has been pretty disappointing when the company announced its 1QFY23 results.

Wegmans’ 1QFY23 headline net profit fell by 96% YoY to RM0.2 mil, dragged by weaker furniture exports especially to the North America region.

After adjusting for gain on foreign exchange, Wegmans reported a core net loss of RM0.1 mil.

So much so, PublicInvest Research cut its earnings forecast by 30-43% for FY23-25, mainly to account for the weaker demand given the rising interest rates environment.

In view of the challenging operating environment for furniture manufacturers, the research house downgraded its call to underperform, with a lower target price of 15 sen based on a PE  multiple of 8x FY24F EPS.

PublicInvest Research remained wary over Wegmans’ future outlook on the back of a slow-down in furniture demand.

Weaker property market, dragged by the rising inflationary pressure are the main reasons for the poor furniture demand.

Its cumulative  4MCY23 US New Home Sales fell by 9.7% YoY to 2.6 million units.

While the favourable forex rate should bode well for furniture exports, it will not be enough to mitigate the negative impact of the challenging operating environment.

PublicInvest Research projects Wegmans’ FY23 core net profit to fall by 56% YoY.

Wegmans’ headline net profit dropped by  96% YoY to RM0.2 mil, in-line with the lower sales volume.

Operating profit  margin fell to 3.3% (1QFY22: 15.6%) on weaker economies of scale and  higher staff costs.

Now that the share price has way surpassed PublicInvest Research’s TP, does this signal better days ahead for the counter?

As it is, Wegmans saw higher US furniture sales driven by the Covid-19 recovery stimulus

The ongoing trade war between the US and China and the Russia-Ukraine

conflict have resulted in sanctions.

Therefore, importers are driven to secure their supply from SEA countries, including Malaysia.

Could the counter surpass its IPO price of 29 sen after 5 years since its listing in 2018?

This should be achievable as there is a strong buying momentum and the buying will likely continue .



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