BUY
Price S$0.30
Previous S$0.44
Target S$0.44
FJB achieved PATMI of S$3.8m (+19% YoY) in 1QFY12, on the back of a 16% growth in revenue to S$96.0m. The results were in line with our estimates. The higher revenue was largely due to improved performance across its key markets, despite the economic uncertainty unfolding in US and Europe. While consumer sentiment in Asia remains healthy, it could still soften with the growing Eurozone uncertainty, which could result in a challenging operating environment for FJB. FJB’s strong brand portfolio, Asian retail network and management’s ability at managing inventory and costs while maintaining margins would help it ride out the uncertain environment. Maintain BUY with TP of S$0.44.
Asia is still attractive for retailers. Revenue from its Hong Kong and China markets rose sharply by 35% and 67% respectively, with the introduction of new brand and more points-of-sale amidst strong consumer demand. We view this as an indication that demand for lifestyle brands is still healthy, especially in China and Hong Kong, with a growing Asian middle class that is more affluent. Hence, this provides FJB with opportunities to try and secure rights to distribute and retail fashion labels that are looking to expand in Asia.
Good management policies help improve margins. On a QoQ basis, revenue edged up 8%. Coupled with good cost management policies, operating margins improved sequentially (1QFY12: 6.5% vs 4QFY11: 6.1%).
Gearing rises as Group expands business to drive growth. FJB’s borrowings increased 32% over the past quarter, mainly due to the funding of its business growth and expansion, especially in Indonesia. As a result, net gearing was 25.3% as at end 1QFY12 (vs 5.5% at end FY11).
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