Results at a glance
POSITIVES
While we will see the full impact of the two store closures in FY18e sales, operating margin should steady at the current 10% level as we expect store productivity to improve by c.11%, from S$1.8k psf (per square feet) to S$2k psf. Rent saved from closure of The Verge and Bedok Blk 209 store, which is now self-owned, also contributed to the lower operating expenses.
NEGATIVES
OUTLOOK
Upgrade to ‘Buy’ rating with higher TP at S$1.13 (previously S$1.06), as we roll forward to FY18e. Our TP is based on an upgraded estimated 4.93 cents FY18e EPS and 23x PE multiple.
We adjusted FY18e PATMI 1.6% upwards on better operating margin. We kept dividend payout for FY18e to c.70%, which gives an implied dividend yield of 3.5%.
Re-rating catalysts: (i) Successful bidding of new stores; and (ii) Improvement of product mix.
Figure 2: Changes in Retail Space/ Business Area
Lin Sin has been an investment analyst in Phillip Securities Research since June 2014, where she started as an economist, focusing on China and ASEAN macroeconomics. Currently, she covers primarily the Consumers and Healthcare sectors in Singapore equities market.
She graduated with a Bachelor of Science in Mathematics and Economics from NTU.