Period

4Q15/FY15

Actual vs. Expectations

FY15 net profit of RM53.0m (+12.6% YoY) was within expectation by matching 101% of our forecast. No consensus comparison is available as the stock is not widely tracked.

Dividends

The Group has declared a fourth interim dividend of 1.5 sen/share, bringing YTD DPS to 6.0 sen (FY14: 10.0 sen). DPS was below our forecast of 7.0 sen due to lower-than-expected payout ratio (52.0%).

Key Results Highlights

YoY, FY15 revenue declined 7.3% to RM225.9m, mainly dragged down by the local market which we believe was due to the persistent weak consumer sentiments. Operating profit surged 59.3% to RM53.0m which the Group attributed to the strengthening of USD. Meanwhile, profit contribution from associates dipped 28.3% to RM17.7m, indicating that the Thailand operations have yet to show any strong sign of recovery. Higher effective tax rate of 25.0% (FY14:18.6%) limited the net profit growth to only 12.6% to RM53.0m.

QoQ, 4Q15 revenue jumped 27.8% to RM64.8m, driven by higher sales in Malaysian, Thailand and Cambodian market. Share of profit from associate dipped 75.8% to RM1.2m, reflecting the challenging business environment in Thailand. Higher effective tax rate of 30.0% (3Q15:19.4%) brought net profit down by 25.7% to RM2.5m.

Outlook

Moving forward, the Group is aiming to attract more distributors, particularly young entrepreneurs who are looking for low entry-cost ventures by adopting ‘small ticket items’ strategy. The Group is also aiming to attract new distributors and retaining existing distributors by enhancing the effectiveness of R&D efforts in developing new products, introducing more promotional campaigns and improving the quality of its customer service.

In view of the absence of catalysts, the continuous lacklustre performance in Thailand operation and the lack of investment interests, we have decided to drop ZHULIAN from our core coverage. Nonetheless, we are looking to continue monitoring and updating any development if we see sufficient and meaningful inputs.

Change to Forecasts

No changes to our earnings forecast.

Rating

Our previous rating was UNDERPERFORM

Valuation

Our last Target Price was RM1.41, based on 11.4x FY16 PER, which implied -1SD over 3-year’s average Fwd. PER.

Risks to Our Call

N.A.

Source: Kenanga Research - 26 Jan 2016