Asia Travel: FY10 results came in below expectation with net profit at $1.6m, -70.7%YoY, despite higher revenue of $82.0m, +15.6%YoY. Dismay performance due to higher operating expenses following aggressive launches of new products and sales channels, to promote and acquire new distribution channels for the new products….
Gross margin trended lower by 3.9%pts to 27.2% while net margin decreased to 2.5% vs 8.0% in FY09. Kim Eng notes the potential for grp to scale up its business, but expect FY11 earnings to remain suppressed as grp continues its marketing activities into 1H11. Recovery in earnings likely visible only from 2H11 which could be a catalyst to re-rate the stock….
Kim Eng downgrades stock to Hold, and reduces TP to $0.47 from $0.62, after cutting previous earnings forecasts by 20-50% to account for the increased operating expenses which would continue through to 1H11.
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