After  shying  away  from  the  investment  community  over  the  past  two years,  Bonia  is  back  on  the  radar  of  investors.  Management  is optimistic  on  the  group’s  outlook  as  its  regional  expansion  into Vietnam  and  Indonesia  moves  into  higher  gear  and  contributes positively.  We  maintain  our  NEUTRAL  call,  with  a  higher  MYR4.80  FV (from MYR3.52).

• Regional  expansion  to  fuel  growth.  We  visited  Bonia  recently  and management guided for  the group’s earnings to at least double over the next  three  years. Note that, for FY13,  Bonia’s revenue grew 9.1%  y-o-y while  its  core  net  profit  moderated  slightly  by  0.2%  y-o-y.  This  was mainly  due  to  higher  operating  expenses  arising  from  high  initial investment costs incurred  during  its  business expansion into  Indonesia and  Vietnam  in  2013.  YTD,  Bonia  has  17  outlets  and  28  consignment counters  in  Vietnam.  In  Indonesia,  the  group  has  eight  outlets  and  65 consignments  counters.  We  believe  that  Bonia  is  on  track  to  deliver decent  earnings  growth  over  the  next  two  years,  which  will  mainly  be driven by stronger sales from regional operations.
• Building  brand  value  for  the  future.  For  2015,  it  is  targeting  annual turnover of MYR1bn with at least 12%  PAT  margin  via  higher sales and better  GPMs.  Bonia  is  looking  to  cultivate  brand  awareness  through various means, including  engaging Taiwanese celebrity,  Sonia Sui as its first  international  brand  ambassador.  With  a  stronger  brand  name, management believes it will have better control over discount modes and can  demand  a premium  on products  to  derive better  margins. We  think management’s  target  to  double  the  group’s  profit  is  a  stretched  one unless it is able to aggressively ramp up overseas outlet expansion.
• Maintain  NEUTRAL.  Our  FV  is  revised  upwards  to  MYR4.80  (from MYR3.52) as we peg the stock to a higher P/E multiple of 14x (from 11x) after  rolling over to FY15 from CY14 EPS. The  14x  target P/E  is based on its 1-year historical mean P/E and is justifiable, given Bonia’s stronger earnings growth going forward. However, due to the limited upside to our FV, we maintain our NEUTRAL stance on the stock and advise investors to accumulate at a lower levels.  Bonia  is currently trading at +2SD  of its 5-year historical mean.

Financial Exhibits

SWOT Analysis

Company Profile

Bonia is involved in manufacturing and retailing of high-fashion branded leatherwear, footwear, men's apparel and accessories.

Recommendation Chart

Source: RHB