Eu Yan Seng

Eu Yan Seng: FY12 results in line with our estimate but below consensus. Rev grew 8.9% yoy to $289.9m, 5.3% while net profit -35.2% yoy to $16.4m. Excluding exceptional items ($8.8m relating to consolidation of Australian business and S$7.1m revaluation gain on investment properties), adjusted FY12 net profit came in at $18.1m. Retail sales performance in its core markets of SG, Msia and HK were disappointing. Sales were dampened by a weaker retail environment, as well as the relocation of existing stores due to higher rental renewals in HK. Same-store sales growth (SSSG) across all three regions was negative. (HK: -2.3%, SG: -2.6%, Msia: -3.7%). Going forward, UOB Kay Hian that core mkts are likely to remain under siege. Expect SSSG to remain flat in the current economic environment. Operating margins will be under pressure from higher rentals, especially in SG and HK, with mgt estimating a 12-15% increase per year. Mgt does not rule out the possibility of acquiring more properties going forward to secure prime retail locations. Ratings as follow: UOB Kay Hian maintains Sell with $0.51 TP