Koda

Came across this small furniture company listed on SGX. It is trading near 52 week lows with a small market cap of around S$11m. Last quarter net profit was around US$0.55m (S$0.7m).

The company's main manufacturing base is in malaysia (after substantial restructuring last year) and its biggest market is the USA (40% of revenue). Should be a major beneficiary of the much weaker ringgit given a big part of revenue is in USD. Many malaysian listed furniture exports have already run up significantly from the ringgit weakness against USD.

See: http://www.thestar.com.my/Business/Busin...?style=biz

Balance sheet is quite weak, cash of US$1.4m vs debt of US$6.7m. But probably not as bad as it looks as they recently announced sale of some excess Vietnamese factories for US$1.8m and have another US$2.8m of investment properties.

One thing is management is all family run which is not positive.

Anyone has any views?

I didn't read much into the company. A brief view below

I checked the FY2014 AR, the sensitivity of currencies on PnL in page 77. The impact from USD seems minimum. The largest impacts were on RMB (China), and VND (Vietnam).

The GPM seems reasonable, but the NPM is very poor, and mostly losses in the last 5 years. I really doubt on the company's moat.

(not vested)

(06-02-2015, 05:21 PM)CityFarmer Wrote: I didn't read much into the company. A brief view below

I checked the FY2014 AR, the sensitivity of currencies on PnL in page 77. The impact from USD seems minimum. The largest impacts were on RMB (China), and VND (Vietnam).

The GPM seems reasonable, but the NPM is very poor, and mostly losses in the last 5 years. I really doubt on the company's moat.

(not vested)

The sensitivity analysis in the AR referred to variances of USD against other functional currencies which included RMB, SGD and VND, but not against Ringgit. So the sensitivity analysis is irrelevant to the investment case.

Share prices of other Malaysia-based furniture manufacturers have run up substantially due to perceived benefits from strengthening USD. I think Koda is in a similar position. What’s more, Its performance may surprise on the upside due to potential operational turnaround (earnings over last few quarters already turned positive).

Only caveat is that this is super small cap with low liquidity.

(not vested)

thanks Cityfarmer and Allentan for your insights. Agree this company has many issues including low liquidity etc.

Agree with cityfarmer, definitely no moat for this company. More a turnaround possibility with currency tailwind. The company shut its China factory and scaled down its Vietnam production, and expanded its capacity in Malaysia last year. As a result they took some impairment charges which resulted in a loss last year. With expanded Malaysia manufacturing base coupled with refocus on US end market suggests currency tailwind in its favour.

Can only wait and see.

(06-02-2015, 07:42 PM)bchang Wrote: thanks Cityfarmer and Allentan for your insights. Agree this company has many issues including low liquidity etc.

Agree with cityfarmer, definitely no moat for this company. More a turnaround possibility with currency tailwind. The company shut its China factory and scaled down its Vietnam production, and expanded its capacity in Malaysia last year. As a result they took some impairment charges which resulted in a loss last year. With expanded Malaysia manufacturing base coupled with refocus on US end market suggests currency tailwind in its favour.

Can only wait and see.

I like the chairman's and the managing director statements, simple, direct, and candid.

May be a good turn-around story, with the restructuring... May be worth to read more on its business model.

With US consumers gaining traction and rise of Chinese middle class, this could further their volume sales and optimisation of factory output in Malaysia and Vietnam.

They have also started a 'branded' furniture concept called Commune. Check out more details: http://www.thecommunelife.com

Will this turn Koda around?

Turnaround gaining momentum...

Last 2 quarters showing significant improvement. Just announced qtr revenue shows it growing topline...

$17M company with strong balanced sheet. Commune products have good quality and design, $ is reasonable for the built.

http://infopub.sgx.com/FileOpen/Koda-Ann...eID=426493

http://infopub.sgx.com/FileOpen/1QFY17Re...eID=428704

Recovery momentum continues. Margin expansion and growth starting to show... and a somewhat optimistic outlook.

Congrats to those VB vested in this one. 

Company is in net cash position and looks poised to grow in China and American markets.

this company is like a mini-HTL, maybe they can sell to guandong timber as well

Boss likes to make it sound good, but in actual fact giving out 2cents from their 8.5c EPS is not that impressive. But pretty candid talking about grooming his 2 grandchildren to take over.

It will be interesting to see how they fare with the recent clampdown in property in major cities in China.

> Check out more details: http://www.thecommunelife.com

This is the key to their fast expansion in China. The retailers pay US$5000 sign-up fee to be franchisee, and foot the capex. KODA sells to the franchisees.

http://www.straitstimes.com/business/com...y-branding

This could be the year of solid recovery after all the cleaning and chopping. :-)