Eu Yan Sang

Eu Yan Sang: Group reported a -51% YoY decline in 3QFY12 net profit of $5.5m on the back of a 10% YoY growth in rev to $89.8m. 9MFY12 net profit fell 72% YoY to $7.2m, on back of an 8% YoY growth in rev to $220.3m, largely due to the $8.8m impairment loss on its Aussie investment. However earnings are still below expectations due to: 1) Lower topline (73% of FY12F) due to the re-location of HK outlets as rental rates increase, 2) A one-off S$0.4m in transaction costs to acquire HealthyLife in Australia, 3) Higher interest expenses due to the S$25m 3% loan notes issued, and 4) Higher taxes. DMG slashes earnings by 16-25% for FY12-14F to take into account the lower sales contribution from Aus, higher interest expenses and tax rates. Using an unchanged 15x FY13F EPS, derive a lower TP of $0.74.