Koda Limited - SAC Capital 2021-07-30: Furniture ODM Manufacturer & Brand Owner

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KODA LTD (SGX:BJZ)

Koda Limited - Furniture ODM Manufacturer & Brand Owner

• Established in 1972, Koda Limited (SGX:BJZ) is an ODM manufacturer for well-known retail brands. ODM manufacturing accounts for 82% of revenue. The manufactured products are sold to North America (67.4%), Europe (10.4%) and Asia (22.2%).
• Koda also owns the brand Commune for mid-to high-end market. The products are sold in 85 stores across Asia Pacific, with 88% of these in China.

Work-from-home and reduced mobility has driven higher demand for home renovation and improvements.

• Fiscal stimulus handouts have raised household savings rate and propensity to spend on goods. In the US, sales at furniture stores surged 49.5% in the first five months of 2021. Year to Apr 2021, Singapore’s furniture and household equipment sales rose 22.7% y-o-y.

Koda's earnings growth catalysts

• Koda's earnings growth catalysts in the next few years are:
  • Higher home sales. Fueled by low interest rates and ample liquidity, home sales are hitting record volume in many countries. This will underpin for furniture and furnishing;
  • Raise capacity. Koda will raise production capacity in 2022 to cater to the higher demand. Production capacity is expected to increase by approximately 30% once operations are normalized in the new factory.
  • New product. Koda plans to ramp up production of sofa sets as demand increase. Sofa sets are easier to produce because the process is relatively straightforward.
  • Greater penetration of Commune. Koda plans to grow the number of Commune stores to 100 by 2022, through rolling out more franchise stores in China. A larger store network will allow it to enjoy operating leverage.

Koda's near term concerns

• Near term concerns include
  • tightened mobility restrictions in Malaysia and Vietnam to cope with a resurgence of COVID cases; and
  • increased adoption of e-commerce sales for furniture. Unlike in the past, furniture brands now face global competition. Those with weak online presence will face greater pressure.

HOLD. Price target of S$1.00.

• Our price target of S$1.00 for Koda is derived from DCF based on WACC of 13.5%.
• Koda Ltd's share price is trading at 4.9x FY21E EV/EBITDA and net earnings are projected to grow at 56% and 29% in FY21E and FY22E.
• See
  • Koda Ltd's Share Price,
  • Koda Ltd's Target Price,
  • Koda Ltd's Analyst Reports,
  • Koda Ltd's Dividend History,
  • Koda Ltd's Announcements,
  • Koda Ltd's Latest News.
• See the report attached below for complete analysis on Koda Limited (SGX:BJZ).

Lim Shu Rong SAC Capital Research | Lam Wang Kwan SAC Capital | https://www.saccapital.com.sg/ 2021-07-30

SGX Stock Analyst Report HOLD INITIATE HOLD 1.00 SAME 1.00