9MFY22 PATAMI of RM76.6m came above our/consensus’ expectation at 81% each, and DPS of 10.0 sen is also above estimates. QoQ, margins dipped due to higher administrative costs and lower footfall after the festive seasons. We expect moderate growth in consumer spending after the festive season, as the “revenge spending” effect wanes in 2HCY22, and also being cautious on margins due to inflationary pressure. We increase FY22E earnings by 28% to account for better consumer spending during the festive season. Reiterate OP with unchanged TP of RM3.80 based on FY23E EPS of 17.6 sen at 21.2x PER.

Above expectation. 9MFY22 PATAMI of RM76.6m came above expectations at 81% each of our/street’s full-year estimate. 3QFY22 DPS of 5.0 sen is above our expectation, bringing 9MFY22 DPS to 10.0 sen.

YoY, 9MFY22 revenue rose by 2.2%, mainly lifted by the higher store traffic as all outlets were operating at full capacity alongside the ease of movement restriction. EBIT margin improved by 4.6ppt to 14%, likely due to better cost management on right-sizing of the workforce and wage subsidies support. PATAMI rose by 175.9% on a lower ETR of 25.5% (vs. 9MFY21 of 28.5%).

QoQ, 3QFY22 revenue dipped by 22.9% due to lower sales and store footfall after the festive seasons. PATAMI declined by 46.4% in tandem with a decrease of 45.3% in EBIT, likely due to higher administrative expenses on bonus payout.

Outlook. On the transitions to the endemic phase, consumer spending may linger as seen during the festive season like the Hari Raya festival in 2QCY22. However, such pattern will eventually normalize in subsequent quarters as the “revenge spending” effect is waning. We are also cautious on margins on the back of supply chain disruptions and inflationary pressure.

Post result, we increase FY22E earnings by 28% to RM120.8m to reflect higher consumer spending and a favourable product mix to mitigate higher expenses. We also raise our FY22E DPS by 2.5 sen to 12.5 sen, implying a 3.7% yield. We maintain our FY23E earnings and DPS estimates.

Reiterate OUTPERFORM with unchanged TP of RM3.80 pegged to unchanged FY23E PER of 21.2x, at 0.25SD below its 5-year mean to account for the ongoing consumer traffic as borders reopened, and a solid net cash balance of RM722m (translating to RM1.10 per share).

Risks to our call: (i) another wave of the pandemic and (ii) higher-than-expected operating expenses.

Source: Kenanga Research - 30 May 2022