KLCI : 1,814
FULLY VALUED RM4.61
Price Target : 12-Month RM 3.40 (Prev RM 3.90)
Dragged by domestic sales
• 4Q13 earnings below expectations; dragged by domestic sales
• Cut FY13-14 EPS by 17-19% in view of a challenging near-term outlook for Malaysia and Thailand markets
• Downgrade to Fully Valued with RM3.40 TP
Below expectations. Zhulian’s 4Q13 net profit fell 56% y-o-y to RM13.7m on the back of weaker revenue of RM78m (-34% y-o-y). FY13 net profit of RM121m (+3.3% y-o-y) was 92% of our full-year estimate. While the 4th quarter used to be the seasonally strongest of the year, this was not the case in 2013, and 4Q13 posted the lowest quarterly earnings in three years. The poor performance was largely due to poor domestic sales likely due to weaker consumer spending.
Meanwhile, the Group has declared its fourth interim and special net DPS of 3 sen and 4 sen respectively (cumulative net yield of 1.5%). This was within our expectations.
Cut FY14-15 EPS by 17-19%. We are cautious on Zhulian’s near-term earnings as consumer spending could continue to be dampened by the rising prices of general goods and services. Also, Zhulian’s Thailand market could face more challenges due to the ongoing political unrest. Hence, we cut FY14-15 EPS by 17-19% to 27-28 sen.
Downgrade to Fully Valued. The stock has gained 81% in 2013. At 17x 2014 earnings, the stock is now trading at +2 SD of its 8-year mean. We downgrade our rating to Fully Valued (from Hold) with a lower RM3.40 TP (from RM3.90) pegged to 12x FY15F EPS of 28 sen. In view of the more challenging outlook, we think its historical dividend payout of 60% is unlikely to surprise.
Publish date: 23/01/14