Polaris

Polaris: 1H13 net profits slumped 27% y/y to $1.2m as revenue sank by 56% to $38.6m. Without the $1.1m gain from negative goodwill on its acquisition of Multi-Channels Services, earnings would have been $0.1m. The significant decline in the top line was attributed to the group's strategy to focus on more stable, growth-oriented and profitable lines of business, which translated to an improvement of its gross profit margin from 3.4% to 6.9%. Sale of mobile handsets dwindled to $35.3m (-60%), although mitigated by revenue contribution from sale of computer hardware, accessories and software of $2.5m and sale of other telecommunications apparatus of $0.7m. On its expenses, labour cost ballooned 84% to $1.3m and other expenses almost tripled to $1.2m (147%), mainly due to higher leases (+553%), legal fees (+221%) and increased marketing expenses (+354%). Polaris is concerned on retail rental and manpower expenses, citing that further inflation would have an impact on its slim margin. In addition, the online store hosted by SingTel remains a challenge to its retail business. NAV/share increased 126% to 0.61cents.