Eu Yan Sang

Eu Yan Sang unveiled 1QFY14 results which was in line, with 1QFY14 typically being the group’s seasonal slowest quarter. Net profit came in at $1.4m (+318% y/y, -69% q/q) and revenue at $79.5m (+13% y/y, +3% q/q). The q/q drop in earnings was largely due to a once-off fairvalue gain recognized in 4QFY13. The group’s top-line was buoyed by a strong performance in its Hong Kong and Australia operations, with revenue for its retail segment at $60.1m (+13%), while revenue for its wholesale segment came in at $14.0m (+15%) largely driven by strong wholesale performance in Hong Kong and Macau. Clinic revenue improved 6% to $4.5m. Gross margins was maintained at a healthy 51%, as gross profit rose in tandem with revenue growth, while operating expenses increased less proportionately than revenue growth, as such operating profit improved 48%, translating to a stronger bottom-line. Going forward, the group expects rising operating costs, especially retail rents to pose a challenge, while tipping its core business to remain profitable and cash flow positive. Aim to pursue other strategic opportunities for growth in new lines of business that complement its existing core. At the current price, Eu Yan Sang trades at a forward 18x P/E, which is in line with its peers simple average. Latest broker ratings as follows: CIMB upgrades to Neutral from U/p with TP $0.75