BONIA (9288) : Bonia Corporation - Less premium growth
Target RM1.43 (Target: ADD)
Bonia’s 1QFY15 net profit was below expectations, making up 17.4% of our full-year forecast and 16.7% of consensus. The disappointing results were mainly due to its main market Malaysia, which registered negative yoy sales and earnings growth. We cut our FY15-16 EPS forecasts by 21-32% to reflect the anticipated weaker sales growth. We roll over our valuation to FY16 and cut our target price by 30%, valuing the stock at 16.3x (previously 19.3x) CY16 P/E, based on the sector average. Nonetheless, we reiterate our Add recommendation as we believe the recent selloff of the stock has been overdone. Improvement in domestic consumer sentiment and higher-than-expected sales growth are potential re-rating catalysts.
Malaysian operations disappointing
Bonia’s 1QFY15 net earnings dropped 8.9% yoy to RM13m. The Malaysian operations disappointed the most, with revenue falling 0.6% yoy, leading to a 11.5% yoy drop in pretax profit to RM17m. This was due mainly to weaker consumer sentiment in Malaysia, which has affected demand. We believe the subsidy rationalisation undertaken by the government has caused consumers to be more cautious about their spending, especially on consumer discretionary products, which affected Bonia’s sales in 1QFY15.
Regional sales growing
On the bright side, Bonia’s second-largest market Singapore registered positive growth in 1QFY15, with revenue increasing 6.1% yoy to RM39.4m and pretax earnings jumping 56.3% yoy to RM2.7m. This was contributed mainly by its Braun Buffel brand, with the contribution from its two new boutiques opened in FY14 starting to kick in and driving sales growth. Bonia’s Vietnam and Indonesia operations also recorded positive growth. Its Vietnam sales jumped 32.9% yoy to RM4.5m while its revenue in Indonesia grew 13.3% yoy to RM6.4m. We expect these markets’ strong growth to be sustained in FY15.
Uncertainties surrounding Malaysian operations to remain
We expect the consumer sentiment in Malaysia to remain weak heading into 2015. We believe consumers will be more cautious in their spending given the continuous subsidy rationalisation. We also expect the upcoming implementation of the goods and services tax (GST) to affect domestic demand, which in turn will hit Bonia’s sales in 2HFY15.
Source: CIMB Daybreak - 28 November 2014
Target RM1.43 (Target: ADD)
Bonia’s 1QFY15 net profit was below expectations, making up 17.4% of our full-year forecast and 16.7% of consensus. The disappointing results were mainly due to its main market Malaysia, which registered negative yoy sales and earnings growth. We cut our FY15-16 EPS forecasts by 21-32% to reflect the anticipated weaker sales growth. We roll over our valuation to FY16 and cut our target price by 30%, valuing the stock at 16.3x (previously 19.3x) CY16 P/E, based on the sector average. Nonetheless, we reiterate our Add recommendation as we believe the recent selloff of the stock has been overdone. Improvement in domestic consumer sentiment and higher-than-expected sales growth are potential re-rating catalysts.
Malaysian operations disappointing
Bonia’s 1QFY15 net earnings dropped 8.9% yoy to RM13m. The Malaysian operations disappointed the most, with revenue falling 0.6% yoy, leading to a 11.5% yoy drop in pretax profit to RM17m. This was due mainly to weaker consumer sentiment in Malaysia, which has affected demand. We believe the subsidy rationalisation undertaken by the government has caused consumers to be more cautious about their spending, especially on consumer discretionary products, which affected Bonia’s sales in 1QFY15.
Regional sales growing
On the bright side, Bonia’s second-largest market Singapore registered positive growth in 1QFY15, with revenue increasing 6.1% yoy to RM39.4m and pretax earnings jumping 56.3% yoy to RM2.7m. This was contributed mainly by its Braun Buffel brand, with the contribution from its two new boutiques opened in FY14 starting to kick in and driving sales growth. Bonia’s Vietnam and Indonesia operations also recorded positive growth. Its Vietnam sales jumped 32.9% yoy to RM4.5m while its revenue in Indonesia grew 13.3% yoy to RM6.4m. We expect these markets’ strong growth to be sustained in FY15.
Uncertainties surrounding Malaysian operations to remain
We expect the consumer sentiment in Malaysia to remain weak heading into 2015. We believe consumers will be more cautious in their spending given the continuous subsidy rationalisation. We also expect the upcoming implementation of the goods and services tax (GST) to affect domestic demand, which in turn will hit Bonia’s sales in 2HFY15.
Source: CIMB Daybreak - 28 November 2014
