Aspial

Aspial: 3Q12 results. Revenue at $119.6m, -3% yoy, as higher revenue contribution from the Property Business and Jewellery Business was partly offset by lower revenue from the Financial Service Business. Recall, Financial Services experienced a surge in revenue in 3Q11 due to the sharp increase in gold price. Net profit was $14.5m, -8% yoy, dragged by a decline in operating profit at $12.5m, -39% yoy, though partially mitigated by higher associate contribution at $7.0m (vs $0.2m yoy). The increase in operating expenses was seen across all cost categories, as the opening of new stores for the Financial Services Business and the new property launches for the Property Business contributed to higher rental, staff-related costs, depreciation and mkt and selling costs. Finance cost also rose on an increase in overall loans. Net gearing however is at 147%, down from 178% in Dec ’11, mainly due to a larger equity base. Overall the group expects to achieve better profit in 2012 vs 2011. On outlook, the group expects the price of private residential property to remain fairly stable in 2012, given the moderate economic growth forecast and low interest rates. Also expects demand for commercial shops to remain positive which will augur well for its upcoming landmark commercial-cum-residential devts at Keypoint and Tai Keng Court. Over the next 6 mths, Aspial intends to focus on the planning and launch of Keypoint, Tai Keng Court, and the newly acquired residential devt at Tanah Merah Kechil Road – all JV projects with Fragrance. Mgt expects the Property Business to continue to contribute significantly to revenue and profitability in 2012 and 2013, as at current mkt prices, it expects to make substantial profits from its devt projects on the back of healthy margins. Notes based on units sold, the group has locked in total revenue of >$400m which will be progressively recognized in accordance with the stage of construction. Also, mgt estimates the potential sales revenue from the upcoming projects attributable to the group to be >$1b. On its jewelery business, mgt is cautiously optimistic that consumer sentiment will remain fairly positive in 4Q12 as the economy continues to grow, albeit at a slower pace. Despite the fewer no. of stores in 2012, expects overall revenue to remain fairly stable in 2012 vs 2011, due to improved efficiency of its retail network. On Maxi-cash, its financial services business, mgt expects the pledge book value and interest income to remain healthy in 4Q12, driven by both existing and new stores. Also expects revenue from the trading of pre-owned jewelery and watches to be stable in 4Q12. Expects to perform better in 2012 than in 2011. The stock trades at 13.9x annualized 9M12 P/E, 3.6x P/B.