Bonia Corporation - A Brand To Be Reckoned With

INVESTMENT MERIT

- Under the limelight, but … Executive Chairman of Bonia Corporation (“BONIA”), Chiang Sang Sem, and persons acting in concert (“PACs”) recently made an unconditional mandatory take-over offer (“MGO”) to acquire all the remaining 100.4m shares in BONIA (approximately 49.83% of share cap) for a cash offer price of RM2.04/share. However, the share price retreated recently following the deemed unattractive takeover offer of RM2.04 (only at 10x FY12a PER and 1.5x FY12a PBV) and the misconception over its weaker 4QFY12 earnings. 

- 4QFY12 results review. BONIA reported a total revenue of RM579.8m in FY12, a 25.7% increase vs. the RM461.m in FY11. The growth in revenue was mainly attributed to sales growth in both its boutique and consignment sales outlets and the additional contribution of revenue from Jeco (Pte) Ltd (Jeco) of RM70.2m, which made up 12.1% of the total revenue. Recall that the group completed its acquisition of Jeco on 20 Dec 2010. As such, FY11 earnings only included the 2H11 profit contribution from Jeco in contrast to a full-year contribution this year. However, BONIA registered much slower growth rates in PBT and PATMI of 18.4% and 4.7% respectively. The lower PBT and net margins of 11.5% and 7.1% (vs. 12.3% and 8.5% in FY11) were due mainly to a fair value adjustment of  RM4.6m on a long term loan to an associate as well  as allowance for impairment loss in associates amounting to RM4.3m in 4Q12. Excluding these exceptional items,  the group would have recorded a PBT of RM77.0m, translating into a PATMI of >RM50.0m or a growth of >27.7%

- MGO below market = less upside potential?  May be not, in our view. BONIA could potentially see a strong jump in its PATMI to RM57.7m in FY13 from RM41.0m in FY12, representing a growth rate of 33.4%, on the back of a likely decent growth rate in the revenue of 13.2%. As such, BONIA is merely trading at a FY13e PER of 9.0x compared to Padini Holdings’ current FY13e PER of approximately 12.1x as per the consensus. Should we peg our projected FY13 EPS of 27.1sen to the FY12 Historical PER of 10.7x, the stock should be valued at RM2.90 on the back of 1.6% in dividend yield.

TECHNICALS

- Resistance: RM2.67 (R1), RM2.77 (R2)

- Support: RM2.06 (S1), RM2.20 (S2)

- Views: S-T (Bullish), M-T & L-T  (Neutral-Bullish)

- Comments: Share price is starting to form a bullish “Cupand-Handle” pattern, denoted by the short bout of sideways trading towards end-August12. Should the price action manage to break above the RM2.65/70 congestion zone, we would expect Bonia to resume its long term uptrend.

BUSINESS OVERVIEW 

- Through a network of over 883 sales outlets and 103 boutiques around the world, BONIA is involved in manufacturing, marketing, retailing and distribution of high-fashion branded leatherwear, men's apparel and accessories.

- Apart from its flagship label of BONIA, the group also operates successful brands such as SEMBONIA and CARLO RINO and holds  licenses for various international labels, distributorship and dealerships of leading brands including SANTA BARBARA POLO, AUSTIN REED, VALENTINO RUDY and JEEP among others.

OPERATING SEGMENTS

- BONIA operates in three segments  - Retailing, Manufacturing, and Investment & Property Development.

- BONIA's retailing segment is engaged in designing,  promoting and marketing of fashionable apparels, footwear, accessories and leather goods. The manufacturing segment involves manufacturing and marketing of fashionable leather goods. The third segment, Investment and property development on the other hand involves investment holding, rental and development of commercial properties.

- Recently, BONIA, via its Singapore subsidiary, was appointed as the master Franchisee for “Renoma Café Gallery” from its Licensor, Renoma S.T.A.R for the territories of Malaysia, Singapore and Indonesia. A first concept “Renoma Café Gallery” will be launched by the end of 2012. 

Source: Kenanga