Thursday, December 26, 2013

Eu Yan Sang -Quarterly Growth Set To Roll Macro (DMG)

Eu Yan Sang
Target Price: SGD0.92
Price: SGD0.82
Quarterly Growth Set To Roll Macro

EYSAN is Asia’s leading family-controlled traditional Chinese medicine (TCM) retailer. Operationally, we believe the company is back on a quarterly growth momentum after posting strong 1QFY14 sales at its Hong Kong and Australia operations. We also expect FY14F/15F earnings to jump 27%/50% to SGD18.7m/28.0m respectively. Maintain BUY and SGD0.92 TP.

¨ A leading Asian TCM retailer. EYSAN is a family-controlled TCM retailer with some 300 points of sales. It is Asia’s leading player with core markets in Hong Kong, Malaysia and Singapore, which make up 39%, 26% and 24% respectively of its FY13 revenue (FYE 30 June). Among its recent initiatives are: i) its venture into Australia via the acquisition of Healthy Life, Australia’s largest health food chain, ii) forming a JV to build a herbs-slicing plant in China, iii) building a new plant in Hong Kong that will triple its current capacity, and iv) collaborating with food and beverage (F&B) giants like Nestle (NESN VX, NR) to launch products with TCM herbs like American ginseng.

¨ Commendable 1QFY14 performance. 1QFY14 revenue perked up 13% to SGD80m on the back of a 26% jump in Hong Kong sales to SGD37m. Meanwhile, a higher number of Chinese tourists lifted demand for its Bo Ying Compound, a traditional Chinese remedy for paediatric discomfort, as well as other Eu Yan Sang-branded products. GPM was stable at 51.2% while operating margin widened by 1.4ppts on better cost controls. Profit rose to SGD1.4m from SGD0.3m a year ago. We expect its Australian unit to narrow its losses to SGD5.0m in FY14 from around SGD9.0 in FY13, before turning in a SGD3.0m profit by FY15.

¨ Quarterly growth momentum back on. Correspondingly, we expect FY14F/15F earnings to climb 27%/50% to SGD18.7m/28.0m. Our estimates have yet to include SGD3.0m in possible tax savings in the event its Australian unit turns profitable. For the upcoming 2Q/3Q, we are projecting earnings expansion of 16%/14% y-o-y to SGD5.4m/9.6m.

¨ Maintain BUY, with SGD0.92 TP. Our DCF-derived TP of SGD0.92 assumes a 9.2% WACC and a terminal growth rate of 3%.

Source/Extract/Excerpts/来源/转贴/摘录: DMG-Research,
Publish date: 23/12/13

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