The management explained in qtr report that this was mainly attributed to the decrease in volume sold. The number of container shipped out decreased by 21% and 13% respectively for Q4FY2019 and FY2019.
In FY 2019, the Group achieved a slight increase in net profit of 1.7% to RM27.7 million despite a
11.26% decrease in revenue to RM147.7 million. This was mainly attributed to the strengthening
of USD and lower unit price of certain raw materials purchased compared with FY 2018.
Homeritz business is very relying on currency earning. Although profit has been improving compared to last year, the reduction in revenue has threaten the company's future prospect.
The Group’s revenue for the Q4FY2019 decreased by 10.4% as the result of decrease in volume sold. The number of container shipped out decreased by 15% for Q4FY2019 as compared to Q3FY2019.
The PBT for Q4FY2019 decreased by 33.34% compared with Q3FY2019. This was mainly attributed to the lower volume of products sold to customers, which resulted in lower economies of scale and the one off expenses of about RM188K in relation to the Proposed Bonus Warrants incurred in Q4FY2019.
Gross profit margin has also reduced from 18% (Q3 FY19) to 13% (Q4 FY19), which is the lowest throughout the year.
Recent news reported Homeritz has managed to secure 8 new sales orders from US customers. The group is planning to expand its production line to cater for those new orders in 3 to 5 years time.
However, it will not directly reflect in the next financial year performance. Hence, the drop in sales in FY19 has revealed that actions from management team are lagging behind. New sales orders are unable to catch up with the drop/slowdown in sales from existing customers.
I forecast that gross profit margin will remain weak in coming FY2020 with the TP at RM0.57 with a 10% discount on its EPS (6.35sen) and PE stands at 9.
Technical Analysis:
A weak financial report without any good future prospect can hardly maintain the uptrend momentum. Hence, we look at the first support line at RM 0.64 (MA200) and second at RM 0.60 (double bottom) for signals of bearish trend.
