FJ Benjamin -
Target Price: SGD0.27
Higher Revenue Amid Tough Times
FJB’s 1Q14 PATAMI sank 83% y-o-y to SGD0.4m, even as revenue rose 2% y-o-y. This was largely due to forex losses, an impairment in the value of its stake in St James, as well as higher tax expenses during the quarter. The company’s outlook remains challenging, although it plans to continue to invest in new brands and expand its stores. Maintain NEUTRAL, with a DCF-based TP of SGD0.27.
■ Lower gross profit margin
FJB recorded a lower gross profit margin of 42.1% (vs 43.4% in 1Q13), as it engaged in more markdown pricing during the quarter. While revenue was in line with expectations, PATAMI was below estimate. Excluding the forex and impairment losses of SGD1.4m in 1Q14 (vs a forex gain of SGD0.5m in 1Q13). PBT would have dipped 18.7% y-o-y. Tax expenses in 1Q14 were a tad higher, as FJB could not apply group tax relief on some of its loss-making operations, due to different jurisdictions.
■ Higher gearing
FJB took on more borrowings during the quarter, as it pushed through its expansion plans. Net gearing as at end 1Q14 was 57.0%, vs 52.8% a year ago.
■ Challenging prospects
In line with its continued investment in luxury fashion brands (a more resilient segment), FJB is set to open a number of new stores for its new (Superdry, Valextra) and existing brands (Celine, Goyard) in 2Q14. Coupled with continued healthy demand for timepieces in its Indonesian market, this is expected to provide some support for group revenue growth.
However, weak demand for luxury timepieces in its North Asia market could dampen growth somewhat.
■ Maintain NEUTRAL
Despite the challenging outlook, FJB would continue to actively manage its inventory and cash flow, while maintaining investment in its luxury brands to drive revenue growth.
We are keeping our NEUTRAL recommendation and SGD0.27 TP.
Publish date: 08/11/13