Christmas is coming…
Homeriz Set for Christmas Boost with Strong US Demand. Currently, North America remains the largest market for the furniture industry, while it is expected to be to further boost by Christmas. According to Adobe Analytics, online shoppers spent $10.8 billion on Friday compared to $9.8 billion in 2023, which show a strong consumer spending in the US market.
So…. Why Homeriz?
Business Introduction
Homeriz is a leading upholstered home furniture manufacturer in Malaysia, specializing in both Original Design Manufacturing (ODM) and Original Equipment Manufacturing (OEM). The Group designs and manufactures a full range of upholstered furniture for sale to customers, and also produces furniture based on provided designs. Its primary customers are international wholesalers and retailers.
Customer segment
The primary market was represented by Asia and Asia Pacific, while secondary was Americas and European country in 2023, while in 2022, Homeriz main market was US and EU which represent RM 133.79M, which indicates that Homeriz relied heavily on the U.S. market for a significant portion of its business.
Financial Performance
The company currently is in a net cash situation, which is 187.65M. As of the latest financial report, the company’s cash reserves alone contribute RM0.405 to the intrinsic value of its shares. For NTA, the company was recorded at RM 0.6494 at Q3 2024, while current share price was only at RM0.615.
Competitive advantages
One of the selling points of the company was ODM, which is Eritz represents the company’s own brand. The brand mainly targets the medium to high-end range. As result the company was having a better performance in their finances, especially in terms of profit margin, which is currently the highest among the competitors.
Future Outlook
The Federal Reserve begins cutting interest rates in the second half of 2024, it could stimulate the US housing market by making mortgages more affordable, leading to an increase in home sales and renovations. This would drive demand for furniture as homeowners seek to furnish new homes or refresh existing ones. Local furniture makers, particularly those offering customized, high-quality, and sustainable products, stand to benefit from this trend.
Risk
Minimum wages
The government has announced an increase in the minimum wage from RM1,500 to RM1,700 and mandatory EPF contribution for non-citizen employees, which may reflect higher cost of the company.
Ringgit Strengthen Against US Dollar
Last financial quarter, the strengthening of the Ringgit against the US dollar negatively impacted the profitability of furniture exporters. Combined with a quarter-on-quarter drop in sales, this resulted in 8.7% and a 4.8% decline in revenue and core net profit. However, for September, October and November, the Ringgit was slightly weakening against US dollar, which may reflect in better result on the next quarter result Q1 2025.
US Political issue
The recent election was win by Donald Trump, which emphasize on Make American Great Again (MAGA). One of the policies was to emphasize moving factories to the US or facing tariffs, which may affect Homeriz operation or even whole furniture industry that located in outside US.