Business Summary:

 

The main activities of Man Wah Holdings (stock code: 1999) is mainly engaged in the research, development, production, sale and related services of sofas, mattresses, panel furniture and furniture accessories. The product made in China will be mainly exported for overseas clients at U.S. and Europe. The rest will generally be sold locally in the PRC. The company designs for Recliner Sofas marketed under “Cheers” 「芝華仕」brand of affordable prices with features having extending footrests and swivel functions. The brand has received the tile of “Famous Chinese Brand”, while the “Enlanda” mattress has been honored as a “Designated Product for Veteran Cadres of the Central Authorities of the State”.  For the past few years, the group has also explored the enterprise sales such as VIP seats at express rail link and at cinema, and enforced the development in e-commerce (O2O).

 

Financial Summary:

 

During the performance for financial year 2016, total revenue rose by 11.8% to HK$7.33B versus HK$6,55B from last financial year. Meanwhile, the net profit increased by 23.4% from HK$1.08B to HK$1.33B. The final dividend increased by 19% to 19 cents. Bonus share with be issued with 1- for 1- basis. Owing to the lower production cost of genuine leather chemistry and steel, the gross profit margin increased by 3.9% to 39.5%.

 

In spite of facing a series of uncertain factors, the sales revenue from sofa and its accessories product have sustainable growth which contributes the net profit to reach the historic highest. The company intends to further enlarge the sales portion from PRC. The group has planned to open at least 200 division shops at mainland, and targets to increase to 50% of the geographical market share of the company profit within 5 years.

 

Historic Stock Price Performance & Recommendation

 

The company was listed locally as offer price of HK$6.8 on 9 Apr, 2010. Bonus share was then issued with 1- for 1- basis on 14 Jan 2015.  The traded price as of 4 Jul, 2016 stood at Hk$11.64 (14% and 32% above 50-day & 250-day moving average respectively) that corresponds a market cap of over 22B. Since there is a sharp price rise of over 30% since the release of final results on 25 May 2016. I expect there will be a minor correction in short term. Price dropping to below HK$11.0 will be a good entry buying point. For medium term, target price and cut-loss price will set to be $13.2 and $9.8 respectively.

 

 

 

References
www.hkex.com.hk
www.etnet.com.hk
www.afe-solutions.com

 

I, Gary Tam, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.