Courts Asia

Courts Asia: Maybank-KE cuts to SELL rating with $0.60 TP (from $0.72), as the house believes the only unique advantage that Courts Asia has, in the highly fragmented market, is its credit operations. Courts Asia’s ROE profile and EPS growth this period is among the lowest in its peer group. The electronics and furniture retailing market offers scant opportunities for price or cost leadership. House expects the Impending cost pressures that Courts Asia face will translate into smaller operating margins, as the group will not be able to pass on the increases to consumers. Stripping out customer credit income (and associated costs), operating margins for the group have historically been negative, a sign of the intense competition in this industry. The 6% GST to be implemented in Malaysia from April 2015 will only affect Courts Asia from FY16 onwards. In the meantime, Maybank-KE expect this to be a share overhang. As a comparison, when Singapore rolled out a 3% GST in 1994, overall retail sales shrank 1.5% that year and 19% QoQ seasonally adjusted.