Journey to Wealth

Bonia - Expansion Pinches Margins

kiasutrader
Publish date: Wed, 27 Feb 2013, 11:32 AM

Bonia's 1HFY13 numbers were below consensus and our estimates. Revenue grew by  6.6%  y-o-y  but  earnings  dipped  30.7%  due  to:  i)  higher  start-up  costs  from  its expansion in Indonesia and Vietnam, and ii) weaker sales from its Singaporean and Vietnamese  operations.  We  see  weaker  numbers  ahead  after  factoring  in  higher capex arising from new stores overseas. Maintain BUY, with a lower FV at RM2.62. Below  estimates.  Revenue  went  up  by  6.6%  y-o-y,  thanks  to  stronger  topline  from Malaysia  (+9%  y-o-y),  Indonesia  (+90%  y-o-y),  Saudi  Arabia  (+15%  y-o-y)  and  Vietnam (+RM5m  y-o-y). Jeco's performance  continued  to  be  weak  as  its  revenue  contribution dropped 14% y-o-y from RM69.4m to RM59.7m. Similarly, royalty income was 7% lower y-o-y, from RM4.2m to RM3.9m on the back of lower sales volume.  
 
Expansion  still  on  track.  Higher  expenses  arising  from  Bonia's regional  expansion  in Indonesia and Vietnam, and softer numbers coming from its Singaporean and Vietnamese operations  have  dragged  down  the  group's  earnings  by  30.7%  y-o-y.  It  opened  five
boutiques in Vietnam and one boutique in Indonesia in 2Q. In the next quarter, Bonia will be opening  two  more  boutiques  -  one  each  for  Bonia  and  Carlo  Rino  -  in  Kemang  Village, Jakarta. We  do  not  expect  any  earnings  contribution  from  Vietnam  and  Indonesia  for  the next two to three years.

Margins thin. Malaysia's consignment counters recorded a flat 1% y-o-y same-point-sales (SPS)  growth  while  its  boutique  stores' same-store-sale  growth  (SSSG)  was  at  a  healthy 9%.  The  encouraging  SSSG  was  mainly  buoyed  by  higher  sales  from  the  Sembonia  and Carlo Rino brands. Nevertheless, its Singapore stores registered SSSG of  -5%. The EBIT margin dipped further from 18.5% to 13% due to higher operating expenses which grew in tandem with their business expansion.
 
Maintain  BUY.  Incorporating  the  lower  revenue  and  higher  expenses  from  the  Indonesia and  Vietnam start-ups,  we  are  cutting  our  FY13  and  FY14 numbers by  14.8%  and  12.5% respectively. Maintain BUY, with a revised FV of RM2.62, based on 11x FY13 EPS.
S
Source: OSK
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