Stock Pick - Pelikan - January 2010

kltrader

Publish date: Tue, 05 Jan 2010, 10:53 PM

Stock Pick - Pelikan - January 2010: "

Bags Rights to Use Porsche Design. Pelikan announced that they has entered into a Manufacturing and Distribution License Agreement with Porsche Lizenz- und Handelsgesellschaft mbH & Co. KG, Germany (65%-owned by Dr. Ing. h. c. F. Porsche AG) for the use of the “Porsche Design” trademark on its writing instruments. The agreement gave 5-year rights to Pelikan to manufacture and distribute writing instruments under the “Porsche Design” brand worldwide commencing 1 Jan 2011. Buy with TP RM2.57 & ex-Rights TP is RM1.71

Briefly on Porsche design. “Porsche Design’’ is a luxury brand founded in 1972. Its product portfolio includes classic men’s accessories, a sport and fashion collection as well as electronic products and a men’s fragrance range. The products are designed at the Porsche Design Studio - one of the best known design houses in Europe - in Zell am See, Austria, and sold worldwide in owned stores, shop-in-shops, high end department stores and exclusive retail outlets. Despite the tough operating environment in the previous year and the fewer licences issued, Porsche Design Group’s revenue continued to grow albeit minimally to 63.5m Euro In FY09 (FYE July) from 63.3m Euro in FY08 on opening of new franchise retail outlets.

Revenue impact minimal but image enhancing. The exclusive manufacture and distributorship of Porsche writing tools was previously granted to Faber-Castell AG, Germany and the 5-year rights have now been given to Pelikan International from 1 Jan 2011. We believe that the revenue and earnings impact is minimal considering Porsche Design’s niche market and since writing tools are only one of its many products, Pelikan’s success in securing the rights is nonetheless testament of the group’s ability to produce quality writing instruments. This would enhance the group’s image as being a leading writing instrument maker. We believe the sales of Porsche writing instruments would continue to grow as Porsche Design group aims to increase the number of stores from 84 currently to >100 in 2010.

Maintain BUY. As the manufacturing and distribution of Porsche Design writing instruments will only commence in 2011, we are maintaining our FY09 and FY10 earnings forecasts at RM44.7m and RM110.2m respectively. Our TP is hence maintained at RM2.57. The ex-date of the group’s Rights issue is fixed for 6 Jan 2010. Our ex-Rights TP is RM1.71.

Source : OSK Research

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