F J Benjamin Holdings Ltd - CGS-CIMB Research 2019-03-29: Fashion Turnaround


F J Benjamin Holdings Ltd - Fashion Turnaround

  • Founded in 1959, F J BENJAMIN HOLDINGS LTD (SGX:F10) is a luxury and lifestyle fashion retailer that operates 220 stores across Singapore, Malaysia and Indonesia.
  • The company aims to return to profitability after five years of net losses and will launch the first Singapore store for a French luxury brand in Jun 19.
  • F J Benjamin trades at a historical FY6/18 P/BV of 0.53x, less than 1 s.d. below its 7-year historical average of 1.0x. It is currently on SGX’s watch list.

Luxury and lifestyle fashion retailer

  • Founded in 1959 by Mr. Frank Benjamin, F J BENJAMIN HOLDINGS LTD (SGX:F10) exclusively retails and distributes over 20 iconic brands across its retail footprint of 220 stores and 300,000 sqf of retail space in the region.
  • F J Benjamin had 16 stores in Singapore, 65 in Malaysia and 139 in Indonesia as at end- FY6/18. Its 50%-owned Indonesia-incorporated associate company started distribution of Casio watches in Indonesia in FYE6/18.

Returning to profitability after years of losses

  • F J Benjamin turned EBITDA positive and reported S$0.9m in FY18 pretax profit after incurring losses in FY14-17. The turnaround was attributed to the closure of its non-performing stores and discontinuation of loss-making brands. Gross margin improved to 46% in FY18 (FY17: 42%) as a result of cessation of low-yielding brands.
  • F J Benjamin reported continued comparable store sales growth for brands like Superdry, La Senza and Guess for FY18. It also executed an omni-channel strategy starting with Superdry e-commerce platform in early-2019.

Bringing a luxury brand that predates Louis Vuitton and Goyard

  • F J Benjamin entered into an exclusive 5-year retail agreement with Faure La Page – a French luxury brand with over 300 years of history – for the retail of the latter’s leather goods and accessories in Mar 19 and will open the brand’s first boutique in Singapore in Jun 19 at Ngee Ann City Shopping Centre. The store will also be the brand’s first store in Southeast Asia and its ninth worldwide. The agreement includes prospects of a renewal for an additional five-year term.

Improving net gearing; raised proceeds from rights cum warrants

  • Net gearing has continuously declined from 78% in FY6/14 to 21% as at end-Dec 18, with a net debt of S$10.9m (1.2 Scts per share).
  • F J Benjamin raised net proceeds of S$8.1m from 341.2m rights shares that come with 682.5m warrants in Apr 18. The warrants have an exercise price of S$0.04 for each new share and will expire in 2021.

Valuation at historical P/BV of 0.54x

  • F J Benjamin currently trades at a historical FY6/18 P/BV of 0.54x, less than 1 s.d. below its 7-year historical average of 1.0x and over 70% discount to regional peers’ average of 1.97x.
  • F J Benjamin has been on SGX’s watch list since Dec 16 after reporting losses for 3 consecutive years.

Colin TAN CGS-CIMB Research | https://research.itradecimb.com/ 2019-03-29
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