Furniture inspiration. HOMERIZ is a renowned integrated designer, manufacturer and exporter of high-end upholstered home furniture for the ODM and OEM. HOMERIZ has made its mark in the international market by building a diverse customer base spanning over 40 countries worldwide. The group exports more than 90% of its products overseas, mainly to Asia-Pacific (45% to FY8/21 turnover), the Americas & European (48%), and Africa & Middle East (1%).

Risk-reward profile is attractive after falling 18.8% from a 52-week high of RM0.665 to RM0.54 yesterday, supported by undemanding valuations of 4.1x (ex netcash/share of 22sen) FY23E P/E (vs 5Y average of 9x), and supported by attractive estimated FY22-24 yield of 5.2%-5.9%. The group is expected to ride on (i) the favourable global consumption of upholstered furniture; (ii) structural demand shift on the US -China dispute; (iii) competitive advantage thanks to superior cost control from its integrated manufacturing operations and in-house R&D team; (iv) beneficiary of stronger USD (over 90% of its products sold in USD while an estimated over one-third of production cost is in RM); and (iv) its new factory and improved production efficiency should contribute to better production volume going forward.

Poised for bullish triangle breakout. Following the double bottom formation, HOMERIZ is steadily creeping up from RM0.50 to end at RM0.54 yesterday. We expect the stock to stage a bullish triangle breakout soon, underpinned by an impending 20D/50D golden crossover and rising technical indicators. A decisive breakout above RM0.56 (200D MA) may spur further upside towards RM0.60 and our LT objective at RM0.665 (52-week high). Collection range is RM0.50-0.54. Cut loss at RM0.48.

Source: Hong Leong Investment Bank Research - 21 Apr 2022