Asia Brands up, Kenanga Research has Outperform

KUALA LUMPUR: Shares of Asia Brands Bhd, formerly Hing Yiap Group Bhd, rose on Tuesday as Kenanga Investment Research initiated coverage with an Outperform rating and a target price of RM4.
At 10.50am, it was up 14 sen to RM3.28. There were 140,100 shares done.
The
FBM KLCI rose 6.79 points to 1,783.94. Turnover was 1.15 billion shares
valued at RM767.72mil. There were 471 gainers, 275 losers and 246
counters unchanged.
Kenanga Research's target price of RM4 was based on 8.5 times FY14E price-to-earnings ratio.
"We
believe this under-researched retail play is ripe for a re-rating as
its earnings profile is now at an inflexion point post the completion of
its acquisition of the Anakku and Audrey brands, which have the largest
market share in the baby apparel (29%) and lingerie (16%) markets
respectively," it said.
The research house said the acquisition
also came with a wider distribution network that its existing brands
(e.g. BUM Equipment, DIESEL, Antioni, Bontton and Unionbay) can tap on.
"These
new brands tend to be more defensive and less discretionary, which
gives the company a more resilient demand visibility while allowing it
to tap the Malaysia's burgeoning middle-income earners market.
"We
estimate FY14-15E net profits to grow 117%-22% on the back of
RM389.9mil to RM443.4mil in sales, which would be higher than Padini or
Bonia's earnings growth.
"Although listed comparables like the
two companies above have larger market caps of RM1.316bil and RM401mil
versus Asia Brown's RM226mil, they only own a fragmented market share
(less than 3%) within their own garment segments," it said.
Kenanga
Research believed that Asia Brown's forward PER would re-rate to 8.5
times (from 6.7 times currently) to narrow its gap with Padini and
Bonia's forward PERs of 12.1 times and 8.2 times respectively.