1QFY14 in-line with expectations. Courts Asia posted 1QFY14 revenue of SGD197.1m (1.6% YoY, 4.6% QoQ) and net earnings of SGD7.0m (5.1% YoY, -44.3% QoQ), which is broadly in-line with ours and consensus’s expectations. We made some adjustments to our earnings forecast to account for higher GFA guidance which is offset by lowered sales per sq ft and higher start-up costs from Indonesia’s operations. Maintain Buy with a lowered TP of SGD1.47, pegged to 16.6x FY3/14F P/E.

1 st quarter is seasonally weak. 1 st quarter is low season for Courts due to an absence of seasonal holidays. 1QFY3/14 underlying net profit of SGD7m was attributed to strong re-launches from Toa Payoh and Tampines in Singapore, which accounts for 69% of Courts’ sales. Malaysia on the other hand registered a fall on like-for-like sales by 4.2% due to recent elections and Indonesia’s haze. Operating margins improved on the back of cost-saving measures implemented in FY3/13, and better rates negotiated for advertising. Pre-opening expenses for Indonesia stores of SGD0.3m have been accounted for this quarter.

Doubling of GFA expansion from original guidance during IPO. Courts is on track to exceed its original guidance of 120,000sq ft GFA expansion by 168,000sq ft. A second “big-box” megastore has been secured in Subang Jaya and is scheduled to open by this December. Two small-format stores in Sabah will open by September. As for Singapore, Courts is on target to open its second store in Westgate mall by December this year.

Stronger sales expected in 2nd half. We expect Courts to post stronger sales in the second half of FY3/14, depending on the date of release of Apple’s new iPhone and new store contributions.

Well placed to gain market share regionally. We continue to be positive on Courts given its steady momentum towards gaining market share in Singapore and Malaysia as well as its new entry into Indonesia. Maintain BUY with TP at 1.47.

Source: Maybank Kim Eng Research - 13 Aug 2013