Epic Centre

Epic Centre: DMG upgrades Epicentre from a Neutral to a BUY with a TP of $0.41, pegged to 12x FY13F earnings, representing an upside of 32% in addition to a yield of 10-13% based on last closing. Earnings improvement in the coming results should be a catalyst to stock price. House expect the current Apple mania fad in Asia to spur Apple branded sales. APRs like Epicentre will continue to see sales grow despite the Apple Online Store as Epicentre is able to offer customers better bundle deals in terms of extended warranty, discounts on associated hardware like speakers, keyboards and accessories. FY12 earnings were affected by at least S$1m one-off costs associated with:- 1) Expansion in China, 2) New M-commerce platform, 3) New CRM programme, and 4) Forex costs. Excluding the one-offs, net margins would have come in at 1.1%. Add that the Group has historically offered a dividend payout of 90% and with costs set coming off and earnings starting to kick in and are confident management will continue to maintain this generous payout.