Koda - Phillip Securities 2021-08-30: Waiting For Resumption


Koda - Waiting For Resumption

  • Koda Ltd (SGX:BJZ)'s 2H21 results beat, with FY21 revenue and PATMI at 116%/107% of our forecasts. The outperformance came from higher-than-expected manufacturing sales.
  • 2H21 revenue grew 65% y-o-y while PATMI jumped 20x, from higher export sales, increased contributions from retail and distribution and improved gross margins.
  • Maintain BUY rating on Koda with lower target price of S$1.10, down from S$1.32 as we roll over our 7x ex-cash P/E to FY22e. This is at the higher end of its historical 5-year ex-cash P/E. We lower FY22e PATMI by 29% to US$7.0mn. FY22e revenue estimate is largely unchanged but we cut gross margins from 32.0% to 29.5% for COVID-19 production disruptions at Koda’s plants in Vietnam and Malaysia.
  • Catalysts still expected from higher exports to US and increase in production capacity.

Koda's 2H21 - The Positives

2H21 revenue and PATMI increased.

  • Higher revenue was led by higher export sales to all regions, especially North America, where sales surged 81% y-o-y to US$26.9mn. Retail and distribution sales also improved. The segment turned around from a net loss of US$835k in 2H20 to a net profit of US$217k in 2H21.

Improved margins.

  • Koda's gross margins increased 6.1 ppts y-o-y to 33.4%, following improved factory efficiency with higher production volume, which lowered unit production costs.

Koda's 2H21 - The Negative

FY21 operating cash flow decreased 11.7% y-o-y to US$7.6mn.

  • Both operating and free cash flow declined, the former due to higher working capital as inventories increased 72.5% to US$19.6mn and the latter due to capex which increased more than 2.5x to US$3.5mn, with the acquisition of a land use right and factory building in Vietnam for US$4.5mn.


US furniture imports.

  • Year to June 2021, US furniture imports increased 46.1% y-o-y to US$30.2bn. Even though imports in June 2021 dipped 1.5% m-o-m, they increased 55.6% y-o-y to US$5.3bn and were still above pre-COVID levels. We expect export sales to continue growing on the back of work-from-home with renewed virus-containment efforts.

Vietnam furniture exports.

  • Year to July 2021, Vietnam’s furniture exports, excluding wood, increased 47.4% y-o-y to US$1.8bn. Exports in July 2021 were down 16.8% m-o-m and up 1.1% y-o-y to US$224.4mn. COVID-19 restrictions disrupted production across the country.


  • Koda has two plants, one in Malaysia and the other in Vietnam.
    • The Malaysian government has allowed manufacturing firms to operate partially if at least 60% of their employees have been fully vaccinated and fully if 100% of their employees are fully vaccinated. Koda is working towards progressive resumption of its Malaysian operations with higher full vaccination rates.
    • In Vietnam, factories are allowed to operate at 70% capacity if all workers have received their first dose of vaccination. They can operate at full capacity if all workers are fully vaccinated.
  • Buffer stocks have minimised the financial impact from the disruptions. However, any longer-than-expected restrictions could affect the supply chain and inventory replenishment.

Retail and distribution.

  • A recent surge in COVID-19 cases in several provinces in China has sparked lockdowns, mass testing and travel restrictions. Chinese officials, however, believe that the situation is generally manageable. We are expecting expansion plans for Commune in China to be partly affected.

Other updates

  • Koda has entered into an agreement to purchase 18 Tagore Lane in Singapore. This is a freehold industrial building costing S$11.2mn.
  • Koda currently leases a building in Defu Industrial Park, where its lease with JTC Corporation will expire on 30 November 2023. It plans to terminate the lease before expiry. The building is used for its corporate office, furniture showroom, product design and development, workshops and warehousing.

Maintain BUY with lower target price of S$1.10, from S$1.32

Vivian Ye Phillip Securities Research | https://www.stocksbnb.com/ 2021-08-30
SGX Stock Analyst Report BUY MAINTAIN BUY 1.10 DOWN 1.32