•  4QFY20 revenue dived -68% yoy to RM36.5m, while consequently registering a core net loss of RM0.3m, attributed to lockdown disruption across most operating regions.
•  Notwithstanding the steep FY20 revenue decline of -25.4% yoy to RM345m, core net profit came in at RM14.3m (-19.2% yoy) - above expectations, on betterthan-expected cost containment.
•  In light of the results, we lift our FY21-22E earnings forecasts by 31-60%, factoring in lower opex. Post revision, our TP is raised to RM0.56, based on a lower CY21 PER target of 7x (from 9x previously).

Better Than Expected Cost Containment; Above Expectations

Bonia’s FY20 revenue came in lower at RM345m (-25.4% yoy) on the back of declines seen in all countries of operation (save for Indonesia) owing to the pandemic disruptions as well as closure of non-performing outlets over the year. That said, we believe the continued rationalisation of its cost base gave rise to better EBITDA margins of 19% (+6.6ppt), leading to a core net profit of RM14.3m (-19.2% yoy) for FY20. The result was above our expectations (125% of forecast), as the better-than-expected cost containment had surprised us on the upside.

Passed the Trough, Modest Recovery From Low Base Likely to Follow

Sequentially, revenue slumped -57.7% to RM36.5m while bottom-line losses widened to -RM0.3m, driven by the severe impact of pandemic disruptions. Near term, we expect sequential recovery off the trough in a lockdown-hit quarter, albeit at a moderate pace, in consideration of lingering concerns on covid-19 and overall cautious consumption spending. The group will look to focus on prudent resource management and brand building - which amongst others, include an enhanced presence in online channels to ensure long term sustainable business performance.

Upgrade to HOLD

In light of the better-than-expected results, we lift our earnings estimates by 31-60% for FY21-22E, while introducing FY23E forecasts. Post revision, our TP is revised higher to RM0.56 (from RM0.50), now pegged to a lower 7x CY21E PER (from 9x previously) reflecting 2SD below the 3-year historical mean PER, given the increasingly challenging fashion retail landscape. Upgrade to HOLD, as negatives look well priced-in, given the c.50% retracement in share price in the past 12-month.

Key Risks

Up/downside risks: (i) improvement/deterioration in SSSG; (ii) sharp rebound/decline in consumer sentiment; and (iv) lower/higher-than-expected operating costs.

Source: Affin Hwang Research - 27 Aug 2020