Bonia- Can it match Padini's sterling performance?

Background

Bonia Corporation Bhd ('Bonia') is involved in manufacturing, marketing, retailing and distribution of high-fashion branded leatherwear, footwear, men's apparel and accessories. For its latest collection & store location, go here.

 Recent Financial Performance

For QE31/12/2012, Bonia's net profit dropped 51% q-o-q or 43% y-o-y to RM7.5 million while its revenue was up 6% q-o-q or 10% y-o-y to RM167 million. The decline in its bottom-line was attributable to increased expenses- a results of its aggressive expansion into the Indonesia, Vietnam & Singapore markets. As sales lagged, the increased operating expenses dragged down its profit.

 

Table: Bonia's last 8 quarterly results

 

Chart 1: Bonia's last 16 quarterly results

Financial Position

As at 31/12/2012, Bonia's financial position is deemed satisfactory, with current ratio at 2.3 times and gearing ratio at 0.25 time.

Valuation

Bonia (closed at RM2.06 yesterday) is now trading at a PE of 14 times (based on last 4 quarters' EPS of 15.3 sen). However, we must bear in mind that the last 4 quarters' earning has been negatively affected by the increased expenses in QE31/12/2012 for reasons as noted earlier. In addition, Bonia provided for impairment loss for its investment in associates and investment properties in QE30/6/2012 totaling RM5.4 million. If the impairment provision is excluded and if its sales from new outlets picked up, Bonia may record a full-year EPS of 20 sen; thus lowering its PE to 10-11 times. 

Note: Affin had issued a positive report on this stock a few days ago (which was picked up by the Star). Affin valued the stock at RM2.36. The current rally could be driven by this report and there is limited upside to the stock.

Technical Outlook

Bonia tested its uptrend line (SS) support at RM1.70 in early May. It has tested its intermediate downtrend line (RR) at RM2.10 yesterday. Can it break above the downtrend line? If not, it may enter into a correction until investors can consider ist future outlook after studying its quarterly result for QE31/3/2013 which is expected to be out next week.

Chart 2: Bonia's daily chart as at May 15, 2013 (Source: quickcharts)

 

Chart 3: Bonia's weekly chart as at May 14, 2013 (Source: quickcharts)

 Conclusion

Based on positive technical outlook, Bonia is a stock worth close tracking. If the result for QE31/3/2013 shows a recovery in its bottom-line (which may justify Affin's positive report), the stock could be a good stock for medium-term investment.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Bonia.