COURTS ASIA LIMITED
RE2.SI
Courts Asia (COURTS SP) - Met Expectations
- FY17 revenue decline made up by lower costs.
- Final dividend of 1.29 Scts declared.
- Expect more new stores and higher margin initiatives going forward.
- Maintain BUY with S$0.50 Target Price on 10x FY18F PE.
What’s New
- Courts Asia reported FY17 earnings that were in line with our expectations. Earnings were S$23.7m (vs S$6.8m FY16), 8% shy of our S$25.7m forecast.
- Revenue was S$740.5m, in line with our estimate (-1.5% y-o-y). The revenue decline was due to softer Singapore and Malaysia sales, which declined by 2-3% y-o-y, offset by an increase in Indonesia sales (+15% to S$25m).
- SSSG for both Singapore and Malaysia were down by -1% to -4%.
- Operating profit, however, improved 42% to S$47m due to an improvement in Singapore’s profitability on better credit-to-cash mix, and efforts to reduce lower-yielding promotions and marketing expenses. Indonesia, however, recorded widening operating losses of S$11m from S$8m last year as it continues towards gaining economies of scale.
- A first and final DPS of 1.29 Scts has been declared, equating to 28% payout ratio and maintaining FY16’s DPS level but below our 1.65-Sct expectation.
Our view
- Going forward, we can expect at least five new stores each in Malaysia and Indonesia, better margin management on products, suppliers, and services, and more omni-channel marketing including the online platform.
- Key earnings catalyst will be a turnaround of Indonesia business into profitability.
- We reduce earnings marginally but maintain our BUY recommendation with a Target Price of S$0.50 based on 10x FY18F PE.
Alfie YEO
DBS Vickers
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Andy SIM CFA
DBS Vickers
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http://www.dbsvickers.com/
2017-06-30
DBS Vickers
SGX Stock
Analyst Report
0.50
Down
0.510
