Towards Financial Freedom
Eu Yan Sang - A Dent In Seasonally Weak 4QFY13
EYSAN's 4QFY13 recurring profit of SGD1.3m (-42% y-o-y, -85% q-o-q) was below our SGD3.0m estimate as the better margins were mitigated by a higher loss in Australia due to the opening of new stores in 2H13 and inventory write-offs. We expect the Australia unit to post a smaller loss in FY14 and a profit by FY15, helping to lift profit by ~35% per annum. Maintain BUY, at a higher DCF-derived SGD0.92 TP.
- 4Q13 topline grows 11%. 4Q13 revenue came in at SGD77m, driven mostly by a 23% surge in Hong Kong sales to SGD34m, buoyed by its strong retail and wholesale businesses. We note demand in the territory was supported by a stable domestic market that benefited from increasing Chinese tourist arrivals, as well as satisfactory performance from its first retail store on board a cruise ship under the Star Cruises line. Growth in Hong Kong was partially offset by a 4% dip in Singapore contribution to SGD17.6m on cautious consumer spending. Sales in Australia rose 15% to SGD9.0m, or 22% growth in local currency terms.
- GPM was stable at 52.0%, better than our expected 49.2%. This suggests that EYSAN's core markets' GPMs rose to 52%-54%, sufficient to compensate for Australia's lower profitability at ~40% GPM. Operating margins widened ~0.7ppt on better cost control. Its reported operating profit dipped 1% to SGD24.1m, and would have improved by 18% if Australia and China are excluded. We note that the Australia unit saw a loss of SGD2.8m in 4Q13, or SGD9.0m for the full year, on the opening of seven new self-operated stores in 2H13, and inventory write-offs.
- Introducing FY15 and quarterly estimates. We keep our FY14F profit estimates largely intact at SGD20.2m, or +37% y-o-y, and expect earnings to surge 34% to SGD27.0m in FY15. We are also projecting for earnings to recover from a low base a year ago to SGD2.3m in 1Q14, and grow by 21% y-o-y to SGD5.7m in 2Q14.
- Maintain BUY at higher SGD0.92 TP. We switch to DCF valuation to better reflect the group's long operating history and 10% profit CAGR since 2001. We assume a 9.1% WACC and terminal growth rate of 3%. This lifts our TP to SGD0.92 (previously SGD0.88). Maintain BUY.
Source: OSK
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
