Homeriz (5160)

Hi Readers,

I would like to share this counter after reading its latest Q3'19 report. I find it interesting and can be a good addition to your dividend stocks collections. For your information, furniture counters were the darlings of 2016 as it recorded impressive gains on the share price. Since then, many were hoping for the return of furniture counters and many false start. It is understood because there wasn't much boost on the sectors. However, with recent trade wars whereby 25% tariffs were slapped on furniture from China and MYR weakening to beyond 4.10, it is helping to boost many of the furniture counters earnings. I have shared Liihen previously and would like to bring your attention to Homeriz. 

Homeritz Corp Bhd an investment holding company, designs, manufactures and sells upholstery furniture products. The company provides upholstery home furniture products consisting of leather and fabric-based sofas, dining chairs, and bed frames; and lifestyle furniture products under the Eritz brand. It is also involved in the property investment activities; and design, manufacture, and sale of furniture and furniture parts. The company’s majority revenue comes from Asia and Pacific market.

Why Homeriz? I read its latest QR and the net profit margin of 18.6% caught my attention as shown in Image 1. The company has been investing on automated equipment to minimize the dependency on human labor; foreign workers mainly which is subjected to levy. Though government has announced reduction of levy, it will be a bonus in the short term for the company. The on-going effort in cost reductions has to continue. Current quarter result is also boosted by MYR weakening and lower raw materials. Additionally, the company announced a $0.02 cents of first interim dividend. This is also a positive development as 2018 total dividend payout was $0.025 cents with first interim dividend at $0.01 cents. With the on-going development, there is a possibility of Homeriz to pay total dividend beyond $0.025 cents. 

Image 1: Homeriz Last Two Years Quarter Report Results 

Technically, the chart is showing double bottom at $0.58 cents as shown in Image 2. Price has since moved up again recently and with the better prospects, there is evidence that it will move higher.

Image 2: Double Bottom on Homeriz at $0.58 cents

As the company has announced a $0.02 cents for first interim dividend, the target price based on its cash flow is trending at $0.82 cents based on the previous target set by HLG, the intrinsic value is $0.66 cents at 15% rate of returns and total dividend of $0.025 cents. What it meant is that when the price is below $0.66 cents, it is a strong buy from dividend perspective. Any increase in dividend payout and target price will yield higher returns from Homeriz investment. 

Possible trade setups:
Entry: Below $0.66
Stop loss: $0.58 and below
Target profit: According to your rate of returns or the levels above
Remarks: As this is considered a dividend stocks from my perspective, one should hold as long as the company continues to pay dividend at minimum of $0.025 cents per year. One can leverage the power of zero cost averaging when the price hits your own target or when it hit the target valuations to generate additional cash flow.

Good luck and all the best!!!

Disclosure: The information above is for sharing purposes without any understanding of investment targets and needs of readers. References to the price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. Please do your own due diligence as this article is not a recommendation to buy/sell.