FJB's 1QFY13 revenue declined 2% YoY to S$94.3m, while PATMI declined 39.2% YoY to S$2.3m. The revenue decline was largely due to lower Chinese tourist spending in Hong Kong. This was partially offset by growth from its Malaysia market. Outlook remains challenging, with the slowing growth in China likely to curtail Chinese tourist spending. However, FJB's portfolio of popular lifestyle and luxury brands would be able to help it ride through near term uncertainties. Its fashion business is likely to continue to grow, backed by the opening of new stores. Given that 2Q and 3Q are seasonally stronger quarters, we are keeping our estimates for now. Maintain BUY with TP of S$0.39, based on DCF, or 15x FY13F earnings. FJB historically trades at an average P/E of 16.8x.

Higher operating expenses dragged down profits. In FY12, FJB opened a number of new stores from 2QFY12. Hence, included in 1QFY13 was the operating expenses (rentals and staff costs) relating to these stores. As a result of higher YoY operating expenses, PATMI fell.

Growth from new store openings. Going forward, we think growth would come from new store openings. Its fashion business is expected to continue to do well, despite the global economic slowdown, as its brands are well received. It is still in discussions to bring in a couple of new brands, which could take place over the next 12 months or so.

Having seen a few downturns, FJB remains resilient. We note that gross margins remain fairly consistent at 43% (4QFY12: 40%; 3QFY12: 46%; 2QFY12: 42%; 1QFY12: 44%). This reflects that despite economic uncertainties, FJB did not have to carry out mark downs or give discounts just to push out its inventory ' an indication of its success at inventory management. We think FJB would be able to maintain its gross margins at this level.

Source: OSK