- We reaffirm our BUY recommendation on Bonia Corporation (BON) with a higher fair value of RM6.20/share (vs. RM5.40/share previously) as we roll forward our valuation base year to CY15F. This is pegged to a PE multiple of 15x over its CY15F earnings.

- Excluding the one-off items, BON delivered a 3QFY14 core net profit of RM15mil, bringing 9MFY14 core net profit to RM48mil.

- The results are within our and consensus’ estimates, accounting for 76% and 78%, respectively.

- 3QFY14’s same-store-sales growth (SSSG) remained healthy – Malaysia (+6%), Singapore (-3%), Indonesia (+56%), boutique (+6%), and counter (+6%).

- On a 9M basis, core earnings rose by 33% YoY on the back of higher sales generated (+10% YoY).

- Furthermore, this was also attributed to better control of operating expenses resulting from a less aggressive expansion overseas. For this financial year, 3 and 2 boutiques were opened in Indonesia and Vietnam, respectively, compared to 4 and 10 that were opened in the same two countries in 9MFY13.

- BON’s aggressive expansion into Indonesia and Vietnam showed improvement - contributing 11% and 9% to revenue, respectively. Malaysia continues to be the revenue driver, at 65%, followed by Singapore at 27%.

- Compared to the immediate preceding quarter, the softer revenue and earnings were within expectations. The Christmas festive, year-end shopping and an early Chinese New Year boosted its 2Q sales.

- In 3Q, BON added only one boutique (Renoma) in Malaysia. This brings BON’s boutique count to 164 and 1,127 counters (+100 counters in 3Q) as at end-9M.

- No dividend was declared for the quarter under review.

- The key upside risk to our earnings are weaker-than expected consumer spending and higher operating cost.

- All in all, we continue to like BON’s earnings growth supported by healthy SSSGs and a well-diversified regional footprint, which is fortified by its strong brand visibility.

- The stock is trading at 14x FY15F PE, below its 5-year historical peak of 19x.

Source: AmeSecurities