KLCI Stock - HOMERIZ / 5160 - 2011 Quarter 1

Company Info

IPO Price	0.65
Market Capital (Capital Size)	92,000,000 (Very Small)
Par Value	RM 0.20

My Analysis

Forecast P/E now	(0.46-0.04)/0.0722 = 5.82 (Moderate)
Target Price	0.51+0.04 = 0.55 (PE 7.0, EPS 0.0722, DPS 0.04)
Decision	BUY
Comment	Revenue increased but lower than preceding year corresponding quarter, eps is lowest all the time, neither got free nor positive net cash flow, liquidity ratio increasing to very strong level now, gearing ratio decreasing to low level now, all accounting period are good, new manufacturing factory in Vietnam will begin operations by the second half of this year, most Europe index increasing, USD against MYR decreasing
First Support Price	0.45
Second Support Price	0.44
Risk Rating	MODERATE

Accounting Ratio

Return on Equity	31.95%
Dividend Yield	8.48%
Profit Margin	15.61%
Tax Rate	9.95%
Asset Turnover	1.3934
Net Asset Value Per Share	0.3
Net Tangible Asset per share	0.3
Price/Net Tangible Asset Per Share	1.57
Cash Per Share	0.1
Liquidity Current Ratio	5.4846
Liquidity Quick Ratio	3.5553
Liquidity Cash Ratio	2.4478
Gearing Debt to Equity Ratio	0.2225
Gearing Debt to Asset Ratio	0.182
Working capital per thousand Ringgit sale	34.3%
Days to sell the inventory	66
Days to collect the receivables	31
Days to pay the payables	32

My notes based on 2011 quarter 1 report (number in '000):-
- The Group’s revenue of RM24.5 million for the current financial period ended 30 November 2010 (Q12011) is lower than the revenue in the previous corresponding financial period ended 30 November 2009 (Q12010) of RM30.7 million. The decrease of 20.19% in turnover is mainly due to lower sales volume and the weakening of the US dollar. The profit before tax for Q12011 decreased substantially to RM3.819 million as compared to RM6.388 million recorded in the Q12010. This is mainly attributed by lower revenue generated in current quarter, the continued weakening of the US dollar coupled with the time lag in passing on the higher costs to its customers and recognisation of net fair value loss on foreign exchange derivatives in Q12011

- The average US dollar against Ringgit weakened by 9.3%, (from RM3.43 in 1Q2010 to RM3.11 in 1Q2011) during the quarter under review compared with the previous corresponding quarter

- The Group recorded a profit before tax of RM3.819 million for the current quarter as compared to a profit before tax of RM4.585 million in the preceding quarter. The decrease was mainly due to the continued weakening of the US dollar coupled with the time lag in passing on the higher costs to its customers and recognisation of net fair value loss on foreign exchange derivatives in current quarter

- In FY2010, revenue recorded RM110 million and profit RM21.7 million
- In FY2009, revenue recorded RM108.4 million and profit RM22.7 million
- In FY2008, revenue recorded RM92.6 million and profit RM12.4 million
- In FY2007, revenue recorded RM73.8 million and profit RM10.5 million

- Revenue regions percentage: Europe-60%, Australasia-26%, North & South America-8%, Others-6%

- Revenue products percentage: Upholstered Sofas-55%, Upholstered Dining Chairs-30%, Upholstered Bed Frames-13%, Others-2%

- Dividend policy envisage not less than 40% of net profit, intends to recommend and distribute at least 50% of net profits

- Estimate next 4Q eps after 2011 Q1 result announced = 0.0172*4*1.05 = 0.0722(revenue incrreased, improved balance sheet), estimate PE on current price 0.46 = 5.82(DPS 0.04)
- Estimate next 4Q eps after 2010 Q4 result announced = 0.0207*4 = 0.0828, estimate highest/lowest PE = 7/4.29 (DPS 0.04)
- Estimate next 4Q eps after 2010 Q3 result announced = 0.0242*4*0.95 = 0.092, estimate highest/lowest PE = 6.47/4.35 (DPS 0.04)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.0268*4*0.95 = 0.1018, estimate highest/lowest PE = 6.04/4.91 (DPS 0.04)

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