Homeritz Corporation Bhd is a manufacturer of upholstered home furniture — dining chairs, sofas and bed frames — under Original Design (including its own brand, Eritz) and Original Equipment Manufacturing. About 99.3% of its products are sold overseas to more than 50 countries. Key markets are Asia, Australia, Europe and the US, with receivables mostly in US dollars.
The stock is attractive for its exposure to the strengthening US dollar, high dividend yield and steady growth.
Revenue has grown annually from RM89.8 million in FYAug11 to RM112.9 million in FY13 while net profit increased an outsized 40% from RM10.8 million to RM15.1 million during this period. Operating margins have been expanding on economies of scale and increased productivity and efficiency.
For FY14, the company posted revenue of RM127.2 million, boosted by an increase in products sold and the strengthening US dollar. Net profit was RM20.3 million, a significant 33.9% increase from the previous year.
Moving forward, management is upbeat on demand outlook.
Valuations-wise, the stock trades at a trailing 12-month P/E ratio of 11.06 times, low relative to its growth. Return on equity is high at 24.5%. It has a strong balance sheet with net cash of RM49.3 million. This equates to 24.6 sen per share or 22.4% of the current share price of RM1.10.
Last but not least, Homeritz offers good dividend yields. It has a minimum 40% dividend payout policy.
The final dividend of 3.1sen for FY14 went “ex” yesterday. This brings total dividends for FY14 to 5.1 sen per share — up from 3.75 sen in FY13 — or about 50% of net profit. This translates to a higher than average net yield of 4.6%.
The Edge Research rates Homeritz a Fundamental score of 1.95 out of 3 and Valuation score of 2.10 out of 3.
This article first appeared in The Edge Financial Daily, on January 29, 2015
