Eu Yan Sang

Eu Yan Sang: reported 1Q13 earnings of $0.3m, which were down 92% yoy , below expectations. The disappointing set of results was due to: 1) Softer retail sales growth across Hong Kong and Malaysia and a surprise decline in Singapore. Both Malaysia and Singapore also registered a decline in same-store-sales growth of 6% and 18% respectively; 2) Opex costs rose significantly as the Group digested HealthyLife in Australia and from rapid new store openings in China. DMG expects weaker sales from all its geographies, reduces topline estimates by 5% for FY13/14F. Also raises opex assumptions resulting in a decline in net profit margins from 5.7% in FY12 to 3.9% in FY13 and subsequently 5.4% in FY14 as sales gradually ramp up in new stores and in Australia. Slashes FY13/FY14F earnings by 41%/21% respectively. Tips new lower TP of $0.57 pegged to 13x FY14F P/E. Downgrades to Sell . The stock is -3.1% at $0.62.