Bonia’s  1QFY14 results were in line with consensus and our estimates. Revenue and core net profit rose by 7.5% and 2.6%  respectively  due to higher  sales  from  the  opening  of  new  outlets.  We  raise  our  FV  to MYR3.14  (from  MYR3.00),  as  we  roll  over  our  valuation  to  11x  CY14 EPS. Maintain NEUTRAL  on the stock,  as we deem its current valuation fair.

• Within  expectations.  Bonia’s  1QFY14  revenue  and  core  earnings (excluding a MYR1.7m impairment loss from a loan to an associate) rose 7.5% and 2.6% y-o-y respectively. The stronger  topline was attributed  to better sales contributions from  Sembonia, Jeco group as well  as other licensed brands, which contributed 32%, 16.7% and 18 .5% respectively of  the  total  increase  in  revenue.  EBIT  and  PBT  were  weaker  by  5.4% and  13.6% y-o-y respectively  on  higher operating expenses (+15.7% yo-y). The costlier expenses were  driven by: i)  additional boutique  rental, as a result of an increase in the  number of stores in Malaysia  from 90 to 101,  and  ii)  more  advertising  costs  amounting  to  MYR1.9m  from branding  activities  for  Carlo  Rino  and  Braun  Buffel’s  126th anniversary event in Beijing, China.
• Indonesia and Vietnam ops doing well.  All regions except Singapore recorded  healthy  same-store  sales  growth (SSSG). Malaysia registered a 6% increase in SSSG y-o-y while that for Singapore moderated by 5%. SSSG for Indonesia was encouraging at ~30%, with six outlets YTD (five Bonia and one Carlo Rino stores) currently in operation. Sales growth for Vietnam surged ~38% y-o-y as its stores were not fully operational yet in the same quarter last year. Currently, there are 16 outlets in Vietnam (six Carlo Rino, five Bonia, four Sembonia and one Braun Buffel stores). The group plans  to open another  1-2 outlets in Ho Chi Minh  City, Vietnam in FY14.
• Risks.  Key  investment  risks  include  weaker  consumer  spending  and higher commodity prices.
• Still  NEUTRAL.  Given the spot-on  results, we are leaving our forecasts unchanged.  We  raise  our  FV  to  MYR3.14  (from  MYR3.00),  as  we  roll over our valuation to 11x CY14 EPS. Maintain NEUTRAL, as the stock is trading in the similar range to its three-year historical P/E of 11x.

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Company Profile
Bonia is involved in manufacturing and retailing of fashionable branded leatherwear, footwear, men's apparel and accessories.

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Source: RHB