FJ Benjamin

Kim Eng on 10 Feb 2012

In line with expectations. Undeterred by the debt crisis gloom last quarter, FJ Benjamin (FJB) reported 2QFY Jun12 revenue of $109.9m, up 18% YoY. Operating expenses rose by 23% YoY to $45.1m, lowering operating margins by 1.35ppts. This was cushioned by a S$2.2m foreign exchange gain from the strengthening of the US$ and HK$ against the Swiss franc, bringing the bottomline to $4.6m, up 16% YoY. In the light of higher-than-expected expenses coming from the expansion of new outlets and the costs needed to further promote RAOUL, we trim our estimates by 1-2% over FY Jun12F-14F. We maintain our positive view on FJB and our target price of $0.425.

Double-digit sales growth in Asia. Both the fashion and timepiece segments continue to achieve double-digit growth in Asia, at 19% and 16% YoY respectively. In North Asia, sales grew 29% YoY to $24.5m; Hong Kong sales grew 9% while sales in China saw a 44% rise. In 2Q, North Asia made up 22% of FJB’s total sales, with Southeast Asia accounting for 77% (-2ppt qoq).

Jewel shining. Over the past year, RAOUL has more than doubled its sales to the US and Europe. The brand is now sold in 39 stores in Europe, excluding Russia, and in major department stores in the US. It continues to receive endorsements from young Hollywood stars, gaining traction in the media internationally.
Going forward. True to its word, FJB reiterated its plans to expand into the ASEAN region and is targeting to own 192 outlets by end-FY Jun12. The group recently set up four outlets – La Senza, RAOUL, Guess and Gap – in Johor Premium Outlet. The intention is to sell down extra inventory and sample products in these stores. More generally, we are optimistic about Singapore’s retail outlook, given that full-year tourist arrivals reached 13.2m, a new record.

Maintain Buy. This well-managed family label continues to provide a generous yield of 5.6%, with positive earnings growth and controlled cash flows. We maintain our Buy recommendation with five-year DCF-based target price of $0.425 (WACC: 7.6%).