FJ Benjamin (KimEng)

Event

FJ Benjamin (FJB) delivered net profit of $13.0m (+56.9% YoY) on revenue of $353.9m (+22.3% YoY) for FY Jun11. The results are largely in line with our forecasts if forex losses and exceptional items are excluded. A dividend of 2 cents per share was also declared, which translated to an attractive yield of 6.3%. We lower our estimates on account of the global uncertainties which may soften consumer demand. Maintain BUY with a lower target price of $0.39.

Our View

Revenue growth was driven by strong consumer demand across all its major markets in Southeast Asia and North Asia. Sales in Indonesia alone grew by 7% YoY. The Timepiece segment showed the strongest YoY growth of 34.8% while the Fashion and Licensing segments grew by 16.5% YoY and 18.9% YoY, respectively. Gross margin also trended higher to 42.8% (+1.5ppt) with corresponding net margin of 3.6% (+0.8ppt).

FJB has a total of 166 stores as at FY Jun11. It plans to increase this to 190 stores in FY Jun12, with new stores mainly in Malaysia and Indonesia. Capex for FY Jun12 is expected to reach $12.6m, including expenditures to improve existing stores. This is part of its organic growth strategy to expand its brand portfolio and capture market share amid the uncertainties in the global economy.

RAOUL has received orders from key retailers in the US and Europe, which include Selfridges, Fenwick, Joseph, Matches, Flannels, Saks Direct and Neiman Marcus. It plans to open another showroom in Milan to expand its European presence. With regard to possible softening in consumer sentiments in the US and Europe, management does not think that it will be majorly affected as only a small portion of its revenue comes from these regions currently. However, it cautioned that growth might be slower than expected.

Action & Recommendation

We are aware that the current economic uncertainties may dampen consumer demand in Asia. We therefore lower our FY Jun12‐14 profit forecasts by 10‐15% despite the in‐line FY Jun11 performance. Peer valuation has also trended lower. We peg our target price to its five‐year average PER of about 15x on FY Jun12 EPS. This translates to a lower price target of $0.39 (previously $0.50). Maintain BUY.