Asia Brands rises on earnings prospects

Business & Markets 2013
Written by Fatin Rasyiqah Mustaza of theedgemalaysia.com
Wednesday, 22 May 2013 10:11
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KUALA LUMPUR: Asia Brands Bhd’s earnings are expected to grow
significantly following its RM245 million acquisition of two core brands —
Anakku and Audrey.
The apparel distributor recorded one of its highest gains since the
company, formerly known as Hing Yiap Group Bhd, was listed on Feb
21, 1997.
At the noon break yesterday, Asia Brands was up 18 sen to RM3.32
with a trading volume of 196,500 shares. The stock was trading
between RM3.15 and RM3.79 and among the top gainers.
Asia Brands shares have gained 12% since early this month. The stock
closed at RM2.96 on May 2.
K&N Kenanga Research analyst Lawrence Yeo Eng Chien said in a
recent report that the clothing retailer is ripe for a rerating as its
earnings profile is now at an inflexion point following the completion of
its acquisition of the brands. The company has the largest share of the
baby apparel and lingerie market.
Yeo said while the initial years will focus on restructuring, the company
expects a significant scope for realising synergies that may come to
fruition in the 2015 financial year (FY15).
“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 Malaysia’s burgeoning middle-income
earners market,” he said.
“Post acquisition of the baby and lingerie segments, we like Asia Brands for its promising ability to build on Anakku’s
extensive retail network, achieve economies of scale and benefit from the reduced seasonality in group earnings. Almost half
of the group’s revenue will be derived from the Anakku baby segment.”
Yeo said in his report Anakku and Audrey will make Asia Brands a market leader with a 29% share in baby apparel and 16%
in lingerie. He added that with such sizeable market share, Asia Brands enjoys the “market leadership” in which it has a
greater flexibility of influencing the market via pricing and setting trends.
The research house estimates the FY14 performance of Asia Brands to grow by 117% on RM389.9 million in sales and
forecasts FY15 net profit to rise 22% on RM443.4 million in sales. This will be higher than PADINI HOLDINGS BHD [] or
Bonia Corp Bhd’s earnings growth.
K&N Kenanga said Padini and Bonia own fragmented market shares in their own segments and are trading at 12.1 times and
8.2 times forward price earnings ratios.
It said the earnings prospects of the two retailers could be affected by cuts in subsidies and the goods and services tax.
While Asia Brands will be affected too, the impact could be to a lesser extent as its baby and lingerie divisions are less
sensitive to economic cycles compared with the fashion segment.
Asia Brands distributes a range of baby products, lingerie, children’s wear and many more, with brands such as BUM
equipment, Diesel, Antioni, Bontton and Unionbay under its wings.