Man Wah has secured many top clients at furniture fair in US.
At 46 cents, Man Wah was recently trading at 4.7x FYMar ‘08 PE and 3.4x FY09 PE, noted DBS Vickers Securities in a report on 17 Jan.
”We believe that the low valuation is unjustified, due to Man Wah’s outlook as a premier domestic sofa brand in China, and its gain of about 40-50% in new customers among Top 30 US retailers during the furniture trade fair in North Carolina, USA, in October 2007.”
Man Wah announced on Jan 16 that group sales grew 60% y-o-y to HK$403.4m in 3Q08, and group gross margin has remained above 30%.
”This is in line with our expectation, and we believe Man Wah is on target to meet our 95% y-o-y net profit growth estimate in FY08 (ending March),” wrote DBS analyst Chong Wee Lee.
DBS Vickers is retaining its above-market consensus net profit estimates at HK$176.7m in FY08 and HK$243.6m in FY09.
“Our fair value remains at S$1.18, using 10x blended FY08/09 PE. There is also potential for fair value re-rating, as we may roll over to FY09 PE upon further evidence of good earnings visibility. Maintain BUY.”
The broker believes that Man Wah may benefit from a few price catalysts in the next few months:
1) Progress on the proposed one-for-one bonus share issue announced late last year. Based on the expected EGM date in February, this exercise may be executed before end Mar 2008; and
2) Updates on Man Wah’s active participation in furniture trade fairs in 1Q 2008.
DBS Vickers believes that these trade fairs may include International Furniture Fair in Singapore, International Famous Furniture Fair in China, IMM Cologne Furniture Fair in Germany, and Furniture Market Fair in the USA.
Recent NextInsight story: MAN WAH: Four analysts reiterate "buy" calls
