Eu Ya Sang

Eu Ya Sang: SCB maintains O/p with $1.03 TP. House believe the worst is over for EYS and estimate an EPS CAGR of 13% over FY12-FY15E, with improving profitability from Australia and China. EYS’s Aus operations, under the Healthy Life Group, recorded its 4th consecutive q/q sales growth of AU$7.2m in 3Q13 and the grp increased the co-operated stores and reduced franchised stores to capture higher sales and control. Mgt expects losses from the Aus operations to narrow, and to be profitable by FY15. The grp aims to grow its Aus network to 50 self-operated stores (from 27) and 50 franchise stores (from 52) in the next three years. Meanwhile, the grp will shift to a more cautious expansion in China. Currently, EYS has 19 retail stores in China, established in the past two years. Losses in China are narrowing ($1m in FY13E) and the grp plans to review its store expansion strategy in China, possibly taking a more cautious, cost-efficient approach Overall, EYS trades at a forward PE of 15x FY14E, a 32% discount to house DCF implied FY14E PE of 22x. Annualising its robust 1QFY13 earnings would imply a PE of 47x