KODA LTD (SGX:BJZ)
Koda - Production Catch Up In 2H
- Koda Ltd (SGX:BJZ)’s 1H22 results were in line with our forecast. Revenue of US$33.8m and net profit of US$3.0m was 47%/58% of our FY22E estimates (Revenue: US$72m, Net profit: US$5.1m).
- Koda's revenue (-14.4% y-o-y) and net profit (-37.2% y-o-y) were impacted by COVID-related factory closure in both Malaysia and Vietnam and higher raw material costs. While export sales saw a decline (- 21% y-o-y) from lower production, Commune’s retail sales continue to grow (14% y-o-y and 9% h-o-h) on higher consumer demand.
US furniture demand is holding out strong.
- Factories in both Vietnam and Malaysia have since resumed operations in 1H and are running on full capacity. Catch up in production will lift 2H revenue. Despite the higher utilization rate, gross margin is capped given the uptrend in raw material costs. Lumber price has risen 178% to US$1265 per thousand board feet from the lowest level in Aug 2021.
- Impending Fed’s interest rate hike will hurt demand as it stifles spending and delays home purchases. We expect the impact of rate hike to reflect further in its FY23 results.
- Koda's Vietnam factory, slated to open in 3Q and contribute an additional 30% capacity when operation is normalised, is pushed back to 4Q due to construction and machinery delay.
2H22 could see moderation in furniture purchases under Commune.
- Demand coming from wfh arrangement is likely to ease in the coming months as more employees return to office.
- Singapore furniture retail sales and volume were down 7.9%/8.2% m-o-m in Dec 21.
- Furniture sales growth in China has also slowed down in Dec, registering 5% m-o-m growth as compared to 12% in November. China’s strict zero COVID policy continues to disrupt retail footfall. Commune is raising its prices to combat rising costs.
Maintained BUY at new target price of S$1.14, derived on DCF. (WACC: 10.8%).
- We adjusted our FY22E & FY23E topline and bottomline estimates for Koda by +5%/-4% and +6%/+1% respectively. This translates into FY22E P/E of 13.0x and FY23 P/E of 12.8x.
- See
Lim Shu Rong
SAC Capital Research
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https://www.saccapital.com.sg/
2022-02-22
SGX Stock
Analyst Report
1.14
UP
1.000
