[ET Net News Agency, 20 September 2019] Citi Research anticipates Man Wah Holdings'
(01999) 1H FY2020 earnings to fall with growth flat on year-on-year despite escalated
tariffs impact for the US segment.
The research house said Man Wah's US revenue was down 20% during 5-month FY2020 as the
US customers switched into suppliers (US/ASEAN) to avert the 25% tariff on reclining sofa
products.
Nonetheless, this has been more than offset by (1) stronger China sales; (2) RMB
devaluation by 3% in 1H FY2020, and (3) lower leather material costs.
Per FY2019 disclosures, China/US/EU & Other constituted 85%/10%/5% of earnings split
versus 49%/37%/11%/3% of revenue split. Thus, China far outweighs the US even though
China furniture market has been flat or even a bit down on subdued property transactions.
Citi believes Man Wah's revenue growth in China should exceed 20% in RMB terms during 1H
FY2020 given (1) encouraging response to new slim design reclining sofas at a comparable
price point of ordinary sofas from rivals; (2) robust online sales (20% of China sales)
with 50% growth during 1H FY2020, and (3) Net 250 store addition to total 2,864 in FY2020.
Citi maintained its "buy" rating on Man Wah, with a target price of HK$6.2. (KL)