Bursa Malaysia furniture sector - a resilient one

There are more than 2 dozen Bursa Malaysia listed companies in the furniture industry. They accounted for about 29 % of the total Malaysian furniture production.

The COVID-19 pandemic affected most of the economies around the world in 2020 and 2021. As such, you may think that the results of the furniture companies under Bursa Malaysia would be disappointing, but you are in for a surprise.

- There was no significant revenue decline in 2021 and 2020 compared to 2019. There was even growth in 2021.

- The industry showed a similar pattern in terms of profits. It seemed resilient to the impact of COVID-19.

The ROE of the sector showed a “humped” pattern with the ROE experiencing a jump in 2014/15. This was mainly due to a 30% increase in the RM to USD exchange rate. Despite this, from 2010 to 2020, the industry average ROE declined at a compounded 5.5 % per annum.

What does this mean if you are an investor in the stock market?

The “hump” is from the confluence of demand and forex factors. It would be very challenging for the industry to regain the past decade’s peak performance.

Look for furniture company stocks whose performance did not follow the “humped” pattern. In other words, look for companies whose performance continued to improve after the 2014/2015 spike.