FJ Benjamin

FJ Benjamin: 2QFY15 net profit more than doubled to $1.2m, while revenue fell 17% to $87.1m, driven by a 10% decline in the fashion business to $69.2m, and a 36% fall in contributions from the timepiece business to $17.6m.

Management attributed the poor top line to marked decline in footfall in Malaysia and Singapore stores, due to soft tourist arrivals from China and Indonesia. In Malaysia, December sales had also been affected by flooding.

Gross margins expanded 2ppt to 40% on better inventory management and lower promotions.

Bottom line was shored by a doubling of other income to $6m from the gain from partial sale of mandatory convertible bonds issued by an Indonesian associated company, an 82% reduction in FX loss to $0.2m, and share of associates and JV’s profits which soared to $0.8m from a low base ($0.2m).

Outlook for FJ Benjamin does not seem promising in the near future. Due to the ongoing decline in North Asian business, the group is in the process of downsizing operations in Hong Kong and Taiwan, which will be completed by 3QFY15.

Meanwhile, sales in Malaysia could be affected post the implementation of GST. In Singapore, there has been a noticeable pick up in Chinese tourist arrivals in Nov and Dec ’14. If a return of Chinese tourists can be sustained (especially with the SG50 celebrations), FJ Benjamin could see improved results in its Singapore stores.

Management guided that the first Superdry store in Singapore was opened in Dec.

FJ Benjamin is trading at 17x annualized 2QFY15 P/E.