Dividend-stock hunters may want to pay attention to Design Studio Group. This inconspicuous cash-rich furniture maker and interior fitting-out specialist has consistently paid special dividends on top of its interim and final dividends since FY2012, thanks to steady earnings growth and a healthy cash coffer.

For FY2016 ended December, Design Studio paid out 6.5 cents a share in dividends, translating into a yield of 10.8% based on its last traded price of 60 cents on Aug 7. On Aug 18, the company will go ex-dividend for an interim dividend of 1.25 cents a share — to be paid out on Sept 8.

The company started out in 1992 as a manufacturer of joinery products. It later expanded into interior-fitting and furniture manufacturing. Today, Design Studio provides interior fitting-out for hospitality and commercial projects. Among its projects are the JW Marriott Singapore and Yotel Hotel at Jewel Changi Airport. Last year, 61% of the company’s revenue came from this segment of the business.

Design Studio also does the interiors for residential properties, mostly high-end condominiums in four Asian countries and Dubai. Its projects include Gramercy Park by City Developments, a residential tower at Cairnhill Place by CapitaLand and Riverbank @ Fernvale by UOL Group. Overseas, Design Studio has worked with Han King Group in China. Residential properties are its second-largest business segment, accounting for 39% of revenue and 54% of pre-tax earnings last year.

The group’s business has been affected by the subdued property market. More than half of Design Studio’s revenue last year was from local projects. Nevertheless, earnings and revenue have remained resilient over the years. Between 2012 and 2016, earnings have nearly doubled.

Last year, earnings grew 21.7% y-o-y to $20.5 million. Revenue increased 7.2% to $179 million. The better performance came from its hospitality and commercial business, but was dampened by lower revenues in its residential property business.

Shares in Design Studio fell 11.9% in late July after the company announced sharply weaker results for 2Q. Earnings fell to $0.6 million, from $4.4 million in 2Q2016. Revenue dipped 31.2% to $28.6 million on the back of fewer and lower- margin projects. This was made worse by higher staff, showroom and marketing costs.

Nevertheless, management remains optimistic. “We continue to see opportunities and prospects in the region, underpinned by a thriving tourism and hospitality sector that continues to increase demand for hotel accommodation,” says the group in its 2Q earnings report. “We are continuing our expansion into international markets such as the Middle East, Thailand and China.”

Design Studio has in fact been expanding overseas quite successfully. Its overseas business has grown from 15% of revenue in FY2015 to 32% in FY2016. Malaysian projects accounted for 19% of revenue last year, up from 11% the year before.

Meanwhile, the group may also benefit from a recovery in the residential property market here. Home prices are set to double by 2030, according to a note by Morgan Stanley earlier this year. This would imply a 5% to 6% increase in property prices per annum. The government has scaled back some of its cooling measures, which has resulted in improving transaction volume in some segments of the market.

There have been some management changes at Design Studio this year. In February, the group announced the appointment of Edgar Ramani as director and CEO. The previous CEO, Ku Wei Siong, has taken on the role of regional CEO of Asia at Nasdaq Dubai-listed Depa. Based in the United Arab Emirates, Depa is the controlling shareholder of Design Studio. It owns 89.6% of Design Studio through a company called Depa Interiors. Ramani was previously the Asia CEO of Australian engineering firm UGL.

In March, Design Studio appointed a new chief financial officer; Chua Wui Lik replaced Kelly Ng, who has retired. Chua was previously CFO of KS Distribution, a unit of KS Energy. Shares in Design Studio are up 14.3% this year and are now trading at 9.4 times earnings. As at end-June, the company had cash of $42.5 million and debt of $92,000. Its market capitalisation is $156.2 million.

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