By Johnson Choo,
SINGAPORE : Mainboard-listed furniture maker KODA is seeing the returns of its strategy to go up-market.
In the past few years, growth has accelerated – registering compounded growth of 28.6 percent per year.
This was due mainly to lower cost and higher-value product offerings.
Making furniture is a highly profitable business for KODA.
In the financial year ended June 30 this year, KODA posted a net profit of US$4.7 million on revenues of US$48 million.
The significance is that profit rose almost 60 percent on-year.
This is because KODA decided three years ago to improve its lineup of furniture with higher quality materials such as premium leather and fabrics.
With more up-market furniture being cobbled together, analysts Channel NewsAsia spoke to say they are positive about local furniture makers like KODA and HTL.
Gabriel Yap, Senior Dealing Director, Phillip Securities, said, “The indication going forward, at least for the next twelve months, does seem to be good. Good in the sense that the expected market growth is in the region of 10 to 20 percent. But why KODA and HTL are able to grow above the market rate is because of the substitutability of their products, vis-Ã -vis some of the European brands.”
KODA’s products are mainly made in Vietnam, where it is enjoying a 20-year tax-free status.
The furniture maker is also sourcing from Dongguang, China, for its relatively lower cost.
Mr Yap said, “At the same time, on the demand side, demand is essentially strong. That’s mainly coming from the US market, where they have clinched two new clients.”
Industry observers say KODA’s latest set of earnings could indicate a possible earnings take-off, but the challenge is for the management to sustain its growth over the next three years.
Ernie Koh Jyh Eng, Executive Director, KODA, said, “We will continue to be involved in Vietnam and we’ve also recently acquired a Vietnamese sub-contractor Rossano, which will help us to spur the growth of the company for 2014. On top of that, with respect to marketing, we’re looking at expanding into the North American market.”
KODA recently secured two American buyers – taking its total confirmed orders to US$19 million.
The company had announced a final dividend of half-a-cent for each ordinary share and a special dividend of a quarter cent. – CNA/ms
