Courts Asia

Courts Asia: 4QFY14 net profit slumped 25% y/y to $11.8m, despite revenue growth of 10% to $207m. This brought FY14 earnings to $28.3m (-32%) which missed estimates by 9%, while revenue of $830.3m (+5%) came in line. For the full year, Courts saw increased sales from both S'pore (+4.4%) and Malaysia (+5.1%), on higher bulk sales of digital & electrical products, two new stores in Singapore, as well as larger credit sales and six new stores in Malaysia. However, the bottom line was weighed by 1) higher impairment allowances on trade receivables from the larger credit portfolio, 2) increased occupancy costs, 3) greater depreciation from new stores in Singapore and Malaysia, 4) higher interest costs on borrowings and 5) the migration to a new third party logistic service provider in Malaysia. Overall gross margin slipped to 30.9% (-0.7ppts) on a shift in mix. Group proposed final DPS of 0.76¢, bringing FY14 DPS to 1.52¢. Going forward, management expects a pick-up in demand in Singapore as more new HDB flats are completed in the next two years, while its recently-opened second megastore in Malaysia should contribute to higher sales. The widely anticipated flagship megastore in Indonesia remains on track for launch in Sep this year, and the group intends to have an additional two to be operational in 2015. At $0.535, Courts Asia trades at 8.2x forward P/E and 0.99x P/B.