Yoong Onn will trade at a 30% fair value discount to RM2.46 for long-term gains

Yoong Onn Corporation Berhad (KLSE:YOCB , Ticker 5159)

In the context of fluctuating consumer spending and changing retail trends, Yoong Onn Corporation Berhad (KLSE: YOCB) is establishing itself as a resilient entity in Malaysia’s home textiles sector. The company is currently trading at a significant discount compared to analyst fair value, providing potential investors with the opportunity for long-term capital growth, solid margins, and an increasing dividend yield. With the retail and distribution sectors contributing over 90% to its revenue, and technical indicators suggesting a potential stabilization, the stock is notable for its quiet accumulation in a low-beta, high-dividend environment.

Disclaimer:

All information shared reflects my personal views and interpretations based on publicly available sources. It is provided for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any securities. Please do your own research or seek independent financial advice before making any investment decisions.

Technical Summary – Yoong Onn Corporation Berhad (Weekly Chart as of July 30, 2025)

Yoong Onn is currently trading at RM 1.73, exhibiting signs of stabilization following a prolonged downtrend from its 2024 peak. The stock has been consolidating in a narrow range between RM 1.60 and RM 1.75 since Q2 2025. Price is hovering around the 50-week moving average, while still above the 200-week moving average, suggesting long-term trend support remains intact, though short- to medium-term momentum is neutral. Key support is identified at RM 1.60, while resistance is seen at RM 1.80–1.85, coinciding with previous breakdown levels.

Momentum indicators are turning cautiously constructive:

• RSI is climbing from the oversold zone and is currently around the 45–50 range, indicating improving sentiment but lacking bullish conviction.

• MACD remains in negative territory but is flattening, with the histogram showing signs of narrowing—suggesting bearish momentum is losing steam.

Volume has declined significantly from the earlier 2024 rally, indicating weak participation. However, the quiet accumulation phase may be underway.

A breakout above RM 1.85 could trigger a recovery toward RM 2.00, while failure to hold RM 1.60 may lead to retesting longer-term support at RM 1.50.

Outlook: Neutral with a slight bullish bias. Signs of a bottoming process are emerging, but confirmation requires stronger volume and a MACD crossover.

Investment Review

Consumer Discretionary – Retail / Home Textiles | Rating: Neutral View (Initiated)

Company Overview

Founded in 1966, Yoong Onn Corporation Berhad (YOCB) is a Malaysian investment holding company engaged in the design, manufacturing, distribution, trading, and retailing of home textiles and lifestyle products. The product range includes:

• Bed and bath linen
• Rugs, carpets, and floor mats
• Kitchen accessories and home décor
• Lifestyle furniture

The company also operates a property rental business. It runs across three business segments: Manufacturing, Distribution & Trading, and Retail.

• FY24 segment estimates:
  • Distribution & Trading: ~55%
  • Retailing: ~35%
  • Manufacturing: ~10%
• 9M Q3 FY25: Likely similar proportions, with modest expansion in retail’s share and stability in distribution.

Company Outlook

Valuation & Sentiment

At RM 1.73, YOCB is trading at a ~30% discount to its estimated fair value of RM 2.46 based on DCF models. Market analysts expect annual earnings to grow at a 16.4% CAGR over the next five years. Despite recent price weakness, this reflects underlying optimism toward margin and revenue expansion.

Dividend Profile

It’s dividend track record is considered volatile, growing the dividend payment (3Y Dividend Growth Rate 14.9%) over the past 10 years.  Dividend is growing alongside EPS, with payout ratios remaining relatively moderate (15-20% of EPS) except for FY2025 where payout doubled to 40%. YOCB announced a single-tier tax-exempt dividend of RM 0.04 per share in June 2025, payable on July 24, 2025. The company maintains a 40% payout ratio, with a forward dividend yield of ~4.6%.

Financial Performance TTM 2025

Profitability remains relatively strong with double-digit net margins and low gearing. YoY EPS saw a slight dip in 3QFY2025 to RM 0.057 (vs RM 0.059 YoY), but prior quarters indicated steady growth.

Sector Trends & Considerations

• Consumer spending sensitivity: Demand for home goods may fluctuate with discretionary income and retail sentiment.
• Cost pressures: RM volatility and import inflation could affect input costs.
• Brand diversification: YOCB benefits from operating under several homegrown and licensed brands, although brand-specific performance data is limited.
• Retail channel shifts: Growth in e-commerce and digital platforms may affect traditional retail distribution.

Recent Quarterly Trends (3Q FY25 Nine‑Months to Mar 31, 2025)

Total nine‑month sales reached RM 230.0 m (vs RM 204.0 m a year prior) at around 85% of full‑year revenue run‑rate  . Based on guidance that retail and online channels continue gaining traction, their proportion may have increased slightly in 9M FY25 relative to FY24.

However, no explicit segment revenue data for the quarterly period is available. If the same structure largely persisted, the distribution segment likely remained the largest contributor (~55%), with retail expanding moderately and manufacturing retaining the smallest share.

Shareholder Return Profile

• 1Y Share Price Performance: -13.0%
• 5Y Share Price Performance: +178.4%
• Beta: 0.27 (low market sensitivity)

Despite long-term capital appreciation, recent 1-year underperformance lags the broader MY Retail Distributors sector (-8.8%) and Malaysian Market Index (-9.5%).

Recent Developments

• June 2025: Declared interim dividend of RM 0.04 per share
• May 2025: 3QFY2025 earnings released (EPS RM 0.057)
• Feb 2025: Corporate secretary resignation (Liew Sh Ning)

No major strategic shifts or M&A activity have been disclosed in 2025.

Peer Comparison (Malaysia – Home & Lifestyle Retail)

*Note: Peer multiples estimated based on sectoral norms.

YOCB trades at a lower valuation relative to its peers and the industry, despite comparable dividend yields and margins.

Valuation Summary

Yoong Onn’s valuation suggests price levels that are below analyst fair value based on earnings potential and asset-light balance sheet. Price-to-earnings and price-to-sales multiples remain below sector averages. With strong margins, modest revenue growth, and a low leverage position, the company may be viewed as relatively resilient within the consumer discretionary space.

Summary View

Yoong Onn Corporation Berhad has demonstrated long-term capital appreciation and profitability, coupled with a healthy dividend profile. Market pricing is currently at a discount to fair value models, though near-term performance has been affected by broader market headwinds and volatility in discretionary spending.

Further developments in dividend consistency, retail channel strategy, and margin preservation could influence sentiment moving forward.

Disclaimer:

The views expressed here are my personal opinions and are for informational purposes only. They do not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Please conduct your own research or consult with a licensed financial advisor before making any investment decisions.