Courts Asia

Courts Asia: 3QFY14 was largely in-line as net profit inched up 1.7% to $6.3m on a 4% rise in revenue to $203.3m, taking 9MFY14 net profit to $20.5m (-28.8%). The rather muted top-line was dragged by a 2.9% decline in sales from Court’s S’pore operations (67% of total revenue), due to lower digital and electrical product sales which was led by weaker consumer demand and lower bulk sales. Meanwhile Msia’s sales (33% of total revenue) grew by 20.8%, led by higher credit sales from an aggressive credit campaign and higher furniture and electrical product sales. Overall gross margins improved to 32.1% from 29.6% mainly due to higher service charge income derived from increased credit sales in Malaysia, while bottom-line was partially weighed by a 50% rise in income tax to $6.2m, attributable to non-tax deductible expenses. Going forward, Courts expects to see positive top-line contributions from its first two megastores in M’sia which commenced operations early this year, alongside its re-entry into Sabah. Meanwhile, the group’s widely anticipated first Megastore in Indonesia will commence operational by 2QFY15. While net gearing is a tad high at 68.4%, this is mitigated by a 2.6x interest coverage. At current price, Courts Asia trades at an annualized 12.9x 3Q13 P/E versus regional Asean peers of 20-30x.