KUALA LUMPUR: Jaycorp Bhd is expected to see lower furniture sales moving forward, due to the weaker consumer sentiment on discretionary spending including furniture as well as potential weakness in its export channels.
Affin Hwang Investment Bank Bhd said while there has been some resurgence in sales for furniture players in Malaysia, it is still too early to determine the sustainability of this recovery.
The firm said Jaycorp's exports to key markets are still grappling from the weak property demand, which may lead to reduced furniture demand from end-consumers.
"On the other side, the rising living cost pressure domestically due to increase in sales and service tax (SST) and fuel subsidies rationalisation are expected to weigh on consumer spending on discretionary products like furniture," Affin Hwang said.
Therefore, Affin Hwang does not expect Jaycorp to secure large orders to recover back to the levels as seen during the pandemic period, which it only expects a flattish earnings growth for the coming years.
In addition, it said Jaycorp's limited brand recognition may impede its bargaining power with its customers, posing potential challenges for the company especially in the current economic environment.
Affin Hwang kept its "Sell" rating on Jaycorp with an unchanged target price of 52 sen.
