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CIMB likes Koda for plans to double number of China outlets by 2020

Samantha Chiew
Samantha Chiew • 2 min read
CIMB likes Koda for plans to double number of China outlets by 2020
SINGAPORE (Mar 26): CIMB likes Koda, the original design manufacturer (ODM) of home furniture, given its plans to more than double the number of Commune outlets in China to 100 by 2020.
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SINGAPORE (Mar 26): CIMB likes Koda, the original design manufacturer (ODM) of home furniture, given its plans to more than double the number of Commune outlets in China to 100 by 2020.

And as at end Dec 2017, Commune, the group’s furniture design and lifestyle arm, operates 43 stores in China and eight outlets in Singapore, Malaysia and Australia.

Currently, the group exports its furniture products to more than 50 countries.

The group started its retail business in 2011, with the opening of the first Commune outlet in Singapore. In 2014, it opened its first overseas outlet in China.

Since then, Commune outlets in China expanded through a dealership model – providing dealers with intellectual property, technology and supplying its ODM products at wholesale prices without charging royalty fees.

Koda plans to partner trade development agency, International Enterprise (IE) Singapore, to tap into China’s growing market via an omni-channel model – integrating Commune’s online and offline presence through data analytics and business intelligence tools.

In addition, the group plans to equip its China outlets with virtual reality (VR) capabilities to enhance customers’ shopping experience.


See: Homegrown furniture maker challenges consensus on demise of retail sector

In an unrated report on Friday, analyst Colin Tan says that despite retail transformation, the group’s net margin continues to expand.

Koda’s FY17 earnings more than doubled y-o-y to FY17 due to higher revenue contribution from the Commune retail and distribution business, which commands higher operating margins than the OEM/ODM manufacturing segment, as well as improved supply chain efficiency


See: Koda FY17 earnings more than double to US$4.1 mil

The group’s retail and distribution business also turned profitable in FY17, with operating profit of $0.8 million, compared to operating losses of $0.2 million in FY16.

Currently, the stock is trading at 9.0 times CY17 earnings based on an issued share capital of 82.36 million shares exclusing those in treasury.

“Koda’s CY17 P/E multiple represents a 37% discount to regional furniture retailers’ average P/E of 14.3 times,” says Tan.

As at 10.51am, shares in Koda are trading at 66 cents flat or 10.2 times FY17 earnings with a dividend yield of 2.5%.

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