Eu Yan Sang

Eu Yan Sang - Latest news on the co. was two weeks back, where the grp report 1QFY14 results which were in line, with net profit of $1.4m (+318% y/y, -69% q/q) on revenue of $79.5m (+13% y/y, +3% q/q). Apart from being seasonally the slowest quarter, the sequential decline in earnings was largely due to a once-off fairvalue gain recognized in 4QFY13. The group’s topline was buoyed by a strong sales performance in its Hong Kong (+26%) and Australia (+16%) operations with S’pore (-2%) the only exception. Revenue for its retail segment rose 13% to $60.1m from growth in most markets, while wholesale revenue jumped 15% to $14.0m, largely driven by Hong Kong and Macau. Clinic revenue improved 6% to $4.5m. Gross margins was maintained at a healthy 51% and with operating expenses kept in check, operating profit soared 48%, translating to a stronger bottomline. During the quarter, the group added four and closed five outlets, taking its retail chain to 299 shops, comprising 250 company-operated and 49 franchisee outlets. The number of clinics (29) and medical centres (2) remained unchanged. Net gearing is a manageable 0.5x. 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. The group will also pursue other strategic opportunities for growth in new lines of business that complement its existing ones. At the current price, EYS trades at a forward 18x P/E, at the higher end of its TCM peers in HK and S’pore. Latest broker ratings as follows: CIMB upgrades to Neutral from U/p with TP $0.75