YOCB (5159): Author's Review

Yoong Onn Corporation Berhad (YOCB) is a leading integrated designer, manufacturer, distributor and retailer of home linen and bedding accessories in the region.

Backed by over five decades of experience, YOCB has more than 10 main brands of home linen for premium to mid-range consumers to date.
Their well-established brands include Novelle, Jean Perry, Ann Taylor, Louis Casa, Genova, Niki Cains, Diana, and Cotonsoft.

YOCB provides home ware and lifestyle furniture to complement own-manufactured home linen and bedding accessories, such as:

• Bed and bath linen; 
• Bed, bath, living room and kitchen accessories; 
• Rugs, carpets and floor mats; home ware; and
• Lifestyle furniture.

Bed linen and bedding accessories made up the bulk of the Group’s revenue.

The range of products export to more than 17 countries namely Australia, Brunei, Cambodia, Dubai, Fiji, Indonesia, Japan, Mozambique, New Caledonia, Nigeria, Papua New Guinea, Philippine, Singapore, Taiwan, Thailand, Turkey and Vietnam.
However, the Group’s domestic operations still remained as the main driver of its revenues and profits.

YOCB's target markets including:

• Third party retailers i.e. departmental stores, hypermarkets, supermarkets and specialty stores;
• Mass end-consumer market through their fully owned retail outlets under the 'Home’s Harmony' and 'Niki Cains Homes' brand name;
• Institutions including hotels, resorts, hostels, hospitals, royal customs and military accommodations and cruise ships;
• Intermediaries including distributors and importers in oversea countries; and
• E-commerce platform companies on online shopping.

There are total 4 divisions under YOCB.
Distribution and Trading generally played the largest part of total revenue gained, which is more than 60%.

Financial Highlights

Over the past 4 years, although the revenue figures were up and down, YOCB managed to earn better profit by years.

In profit margin wise, slightly improvement is expected for FY2019 as Hari Raya festive season drops in June (Q4) this year which should pull up the overall performance.

YOCB has successfully acquired positive growth for 5 quarters continuously. 

It is expected another green quarter for Q3 2019 upon the new retail store opening in EkoCheras Mall.

Future Outlook

1. The Group has actively participated in the Government’s rehiring program and sourcing from other local authorised agency to meet labour needs. Long term wise, the Group opted to reduce dependency on labour by increasing automation.
2. As a brand owner, the Group is not subjected to the full impact of competition from lower cost producing countries like Vietnam and China. In fact, these lower cost producing countries could work to the Group’s advantage to maintain competitiveness as the Group could outsource their products to overseas contractors if the need arises. 
3. The Group recognises the importance of regularly introducing new designs for home linen to be in line with the current trend.
4. The Group maintain foreign currency bank accounts for business transactions in the respective foreign currencies. This approach forms a natural hedge to minimise foreign currency exchange risk exposure. The Group also have forward contracts which serve as a hedging instrument for some of the imports purchases.
5. The Group endeavours to source its raw materials locally in future.

Author's Perception

1. The business is dependent on currency rate of USD against MYR, as majority materials such as textile fabrics and cotton fibres are denominated in USD, while local market is the main driver of the business. Hence, good profits can be predicted if USD is depreciate against MYR.
2. It will be a bonus if the Group able to do more exports in the future. This will eventually reduce the impacts of currency rates to the business.
3. The business nature of the Group are generally categorised in retail sector, which are subject to seasonal variations such as major local festive seasons, school holidays and carnival sales. Usually Q2 (Oct-Dec: Year-end carnival sales) and Q3 (Jan-Mar: Festive season) will perform better than Q1 and Q4, where the Group called it dull season.
4. Thirty largest shareholders owned up to 85.37% of total shares. Thus, the share price is comparably less fluctuate. Technical trend will be less reliable for this stock.
5. Current share price (RM1.18) is 0.84 times undervalued to its NTA of RM1.40.
6. Dividend yield of approximately 3.4% (4 cents average yearly) would be more attractive if to be further improved.

Technical Comment

Although there is no significantly different in pricing, it is observed that MACD lines are moving closer to each others and CCI has started to move into positive range.
It seems to be going into bullish trend soon.
It is expecting the price to rise until previous high at RM1.24. But due to low liquidity of shares in market, it takes time to reflect the true value of this stock.