Bonia  (BON)’s  9MFY13  numbers  were  below  our  and  consensus estimates.  Its  9M13  revenue  expanded  by  8.2%  y-o-y  but  core  earnings dropped  13.9%  due  to  costlier  expenses  arising  from  its  regional expansion. We are trimming its FV to MYR2.42 (from MYR2.62) in view of the softer contribution from Jeco, which markets Braun Buffel. BUY.

-  Braun  Buffel  in  transition.  BON’s 3Q13 revenue  rose  8.2%  y-o-y, thanks  to  stronger  topline  contributions  from  Malaysia  (+12%  y-o-y), Indonesia  (+40%  y-o-y),  Saudi  Arabia  (+10%  y-o-y)  and  Vietnam  (from MYR1.9m  to  MYR10m  y-o-y).  However,  the  overall  contribution  from Jeco  was  lower  by  11%  y-o-y  due  to  weaker  sales  in  Malaysia,  as  the 
Braun  Buffel  brand  switched  from  retailing  via  consignment  counters  to boutique stores. The number of its consignment counters shrunk from 17 to nine, while boutique stores increased from 11 stores to 14. Meanwhile,   BON’s 9M13 royalty  income  was  higher  at  MYR5.6m  vs  MYR4.5m  last year,  largely  driven  by  better  sales  in  China.  Core  earnings  YTD, excluding a MYR2.2m loan provision in 3Q13, were lower by 13.9% y-o-y due to heavier expenses arising from its regional expansion in Indonesia and Vietnam as well as softer contributions from Jeco.  

- Malaysia  still  the  backbone.  Its  Malaysian  consignment  counters registered  a  5%  y-o-y  same-point-sales  (SPS)  growth  while  its  boutique stores’ same-store-sale growth (SSSG) stood at 7%, supported by strong contribution  from  secondary  brands  Sembonia  (+18%  y-o-y)  and  Carlo Rino (+23% y-o-y). Growth in its Singapore stores continued to moderate by 3% y-o-y, while its EBIT margin eroded from 16.9% to 13.8% y-o-y.

- Creating  brand  awareness.  Bonia  has  recently  engaged  Sonia  Sui,  a Taiwanese celebrity, as its brand ambassador. Going forward, the Group will  focus  more  on  advertising  and  promotions  to  create  brand awareness, while refurbishing its existing stores. It plans to open another boutique in Indonesia in 4Q13. 

- Maintain  BUY.  We  are  paring  down  our  FY13  and  FY14  estimates  by 7.7% and 8.9% respectively in light of Jeco’s softer revenue contribution. Maintain BUY, with a new FV at MYR2.42, based on 11x FY13 EPS.

Source: RHB