FJ Benjamin

Kim Eng on 9 May 2012

In-line results. Despite a slowdown in consumer spending, the strong appeal of FJ Benjamin’s (FJB) brands and sustainability in tourist retail spending in Southeast Asia have helped the group report in-line 3QFY6/12 results. Revenue came in at SGD95.8m (+7.5% YoY) and net profit was SGD3.5m (+8.4% YoY). The group is intent on adding new brands in the coming months to further strengthen its portfolio. We maintain our BUY recommendation and target price of SGD0.425.

Resilience under expansion. FJB’s healthy topline growth was driven by selected markets in Southeast Asia – the fashion segment in Malaysia and the timepiece segment in Hong Kong both achieved double-digit growth rates. Operating costs were in line with the topline expansion, attributed to the increase in number of hire, new store rentals and additional expenses incurred in starting new stores. Gross margins rose by 2.3ppt to 46% on a YoY basis, while net profit margin remained largely the same at 3.7%.

Managing costs well. In March, FJB opened a new logistics centre in China to consolidate the dual processes of sampling and distribution. The centre is expected to spend SGD0.8-1m pa. The move is in line with the group’s cost containment strategy as it lowers distribution cost.

Dividend track record. Inventories rose by SGD4.5m to SGD111m and payables of SGD10.4m were settled due to festive period stocking. We expect this to lower during next quarter’s low season and smooth out its operating cash flow. Though net gearing has risen from 6% to 46% due to higher borrowing for store expansion, we note that the dividend payout has been consistent at SGD0.02 since 2008, except during the financial crisis, where the group paid out SGD0.05. The dividend yield is 5.6%.

Solid brand execution, BUY. By end-FY6/12, FJB will have a total of 192 stores, versus 166 in the last fiscal year. Maintain BUY and target price of SGD0.425, based on a five-year DCF valuation (WACC: 6.4%).