• Despite posting a weaker turnover of RM78m (-17.1% yoy), Bonia registered a higher 1QFY21 core net profit of RM7m (+40.8% yoy) aided primarily by proactive cost-control measures by the group.
• We raise our 2021-23E earnings by 11-16% to account for the better-thanexpected results.
• Raising target price to RM0.77 (from RM0.56) based on a higher target CY21E PER of 8x. This results note marks a transfer of analyst coverage

1QFY21 results were above expectations

Bonia posted a lower revenue of RM78m (-17.1% yoy) on the back of lower sales volume in all its operating regions – Malaysia (-2% yoy), Singapore (-12% yoy), Indonesia (- 80% yoy), Vietnam (-47% yoy) and others (-45% yoy) due to lingering impacts from Covid-19. Nonetheless, Bonia’s core net profit improved +40.8% yoy to RM7m - above expectations, accounting for 45% of our and 46% of consensus FY21 estimates. Notably, EBIT margin improved 4.7ppt to 13.6% in 1QFY21, attributable to better-than-expected cost-control measures taken by the group during the quarter.

Back to core profitability

Sequentially, the group saw a recovery in sales of 113.9% as MCO measures were lifted during the quarter. In tandem, earnings returned to the black with the group reporting a 1QFY21 core net profit of RM7m (vs a loss of RM0.3m in 4QFY20). Going into 2QFY21, the reinstatement of the CMCO will likely weigh in once again and dampen the recovery momentum in the retail landscape. Longer term, we are cautiously optimistic on a gradual demand recovery moving into the 1HCY21, supported by continued cost-control measures by the group. We are comforted that the group remains committed to improving its brand equity in ensuring its longer-term sustainable performance.

Maintain HOLD, with a higher TP of RM0.77

We raise 2021-23E earnings forecast by 11-16% given the better-than-expected 1QFY21 results largely to pencil in lower opex. Post revision, our TP is revised higher to RM0.77 (RM0.56), now pegged to a higher CY21E PER of 8x, -1SD below its 3-year mean (from 7x) to reflect the growing upbeat sentiment on consumer discretionary names poised to see a low base recovery amid increasingly positive vaccine developments. Maintain HOLD. Up/downside risks: (i) improvement/deterioration in SSSG; (ii) sharp rebound/decline in consumer sentiment; (iii) CMCO lasting longer than expected and (iv) lower-/higher-than-expected operating costs

Source: Affin Hwang Research - 1 Dec 2020