Bursa Malaysia Stock Watch
Hing Yiap Group
kltrader
Publish date: Wed, 01 Sep 2010, 09:29 AM
kltrader
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12-Month Target Price: MYR1.65
? HYG?s FY10 (Jun) results were within expectations. Overall revenue was flat, but net profit jumped 31% YoY, due largely to a 2.6 bps improvement in operating margin.
? The manufacturing division saw revenue rebound 46.9% YoY from a low base in FY09 and positively, revenue has exceeded pre-crisis levels. Operating profit margin improved to 4.3% from 1.1% in FY09. The trading division saw revenue slip 3.6% YoY due to the ongoing consolidation of the group?s unprofitable outlets, but as a result of this move, as well as tighter inventory control, margins jumped to 11.4% from 8.8% in FY09. HYG?s beverage segment (the theobroma Chocolate Lounge) doubled revenue YoY but remained loss-making in FY10.
? Our FY11 net profit forecast is raised by 7.7%. We are encouraged by HYG?s efforts at improving efficiency through greater cost control and the closure of non-profitable outlets. Moving forward, nevertheless, we
expect margins to narrow as some of the cost savings from outlet closure are unlikely to be repeated. Consequently, we project a decline in FY11 earnings.
? HYG?s balance sheet remains sound, with a net cash position of MYR5.5 mln. Management has declared a DPS of 10 sen for the year.
? We maintain our Buy call on HYG with a higher 12-month target price of MYR1.65 (MYR1.30 previously), on higher peer valuations and our earnings upgrade.
? Our target price pegs HYG?s FY11 EPS to a PER of 6.2x (5.1x previously) and is based on peer valuations and adds our projected net DPS. The change in our target PER comes from higher peer valuations.
? Valuations are undemanding, in our view, with the stock trading at a prospective FY11 PER of 5.6x and a P/BV of 0.74x. Dividend yields, meanwhile, are attractive at about 7%.
? Risks to our recommendation and target price include: (i) inflationary pressures affecting consumer sentiment and purchasing power, (ii) higher-than-expected stock write-downs and (iii) fashion risk.
Board: Main
Sector: Consumer Products
GICS: Consumer Discretionary/Apparel, Accessories & Luxury Goods
Market Value - Total: MYR59.3 mln
Summary: Hing Yiap Group (HYG) manufactures garments and is also involved in retailing apparel, footwear and other related accessories of its in-house brands and international labels through consignment outlets or its own retail stores.
Major Shareholders:
Chi Kuei Yung & Sons Realty Sdn Bhd 42%
Chi Oi Meng 7%
Dato' Azizi Bin Yom Ahmad 5%
By Standard & Poor's
Analyst: Desmond Ch?ng, ACA
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