AGM Learning Series – Homeritz Corporation Berhad

Greetings MIP Graduates!

We wish you a very prosperous year of the Fire Rooster ahead!

On 25^th January 2016, I visited the Annual General Meeting of Homeritz Corporation Berhad in Muar, Malaysia. It has a market capitalisation of more than $280 million ringgit.

Founded in 1997, award-winning Homertiz performs Original Design Manufacturing (“ODM”) and Original Equipment Manufacturing (“OEM”) for furniture and it sells its own brand of lifestyle furniture series under “Eritz”.

(source: http://www.eritz.com.my/)

Homeritz generated 485% in wealth since 2012.

Source: Google Finance

From Financial Year 2012 to Last Twelve months financial data:

• Its operating income grew from 17.6 million to 34.3 million.
• Return on Equity has been above 20%
• Net Profit Margin grew from 14.2% to 17.1%.
• Current ratio above 5.0x
• No debt and it has $0.184 of net cash per share on the balance sheet.
• Both executive directors (Chua Fen Fatt and Tee Hwee Ing) owns >50% of Homeritz collectively.

As one can tell, the business results are improving year after year and the business value of the company has increased.  We tend to look for countries who can grow out of their domestic market and go global.

Here is the breakdown of their geographical information as of FY2016:

It has an impressive list of customer base from 50 diverse countries such as Europe, Australia, New Zealand, North and South America, South Africa and the Middle East

Recognising the attractive prospects of Homeritz, the 8I Education team attended their Annual General Meeting in Muar on 25 January 2017.

Board of directors of Homeritz Corporation Bhd, at their AGM (Jan 2017)

Surprisingly, for a company that compounded its shareholders’ wealth by 37% over 5 years, the AGM was attended by around 20 shareholders – it was one of the quietest AGMs that we ever attended! The shareholders was rather quiet throughout, even during the Q&A session. I took this opportunity to network with the board members to learn more about the company.

Husband and wife team ChuaFen Fatt and Tee Hwee Ing

(source: www.thestar.com.my)

Here are some of the key lessons about the company and industry that was understood from the AGM:

1. The furniture manufacturing industry, despite efforts to automate manufacturing processes, remains as a labour intensive industry.
2. Furniture manufacturers will normally participate in furniture fairs around the globe in the efforts to get new clients to manufacture for. They will also attempt to sell their product designs in these fairs. The sales & marketing team of Homeritz have been very busy travelling from country to country attending these fairs.
3. The Executive directors of Homeritz seem to be introverts. While some several listed companies management tend to boast about their results excessively, the executives rather focus on delivering the business performance and let results for speak itself. Their work ethic is also observed by the Company’s senior staff as well.
4. We like how the management is conservative and this plays out well in their cautious expansion.
5. Homeritz have been serving their existing clients for a relatively long time. On average, they have been in business with their clients for 4 years with the longest one being 15 years.
6. The furniture industry in Malaysia recently faced difficulty in securing foreign workers for production due to the Malaysian government freezing the intake of foreign workers. However, for Homeritz, they have successfully secured about 60 new workers for their production in the next financial year.
7. All the senior staff including the accounts team, sales and marketing team, and purchasing team have been working with Homeritz for a very long time (even before listing). They seem to be very happy working for the company and they are sociable with shareholders.

We hope that this will be helpful to you, should you be interested to analyse the company further! I can’t help but notice there is another similar company listed in Australia, you may check out Nick Scali Limited (ASX:NCK) as well!

We hope that this is helpful if you interested to analyse Homeritz further!

Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author(s) involved in the writing of this message do(es) not have current vested interest in the company. Please consult a professional for expert financial or other assistance or legal advice.