Sales momentum continuing in 3QFY6/22
? We came away positive from a recent meeting-cum-site visit to Bonia outlets,
with stronger-than-expected sales leading to higher economies of scale.
? Bonia will continue to leverage on ongoing brand-building exercises (social
media collaborations and digital marketing) to improve its brand appeal.
? We retain our Add call with a higher TP of RM3.00 (15x CY23F P/E).
Better-than-expected sales in 3QFY6/22 setting the pace
While we had earlier projected significantly weaker qoq results in 3QFY22 (due to surge in
Covid-19 cases in Feb 22), we gather that Bonia saw strong demand for its products in
3QFY6/22. This was mainly driven by ongoing brand-building exercises, with Bonia
investing in digital marketing as well as more marketing events, including collaborations
with social media influencers. We now estimate a smaller qoq dip in sales of 20% in
3QFY22 (due to seasonality factors as 2Q is typically a stronger quarter due to the
Christmas period) vs. earlier expectations of a 50% qoq dip. Re-rating catalysts include
higher-than-expected operating margin from a more profitable sales mix.
Streamlining outlet count and opening more boutiques
Since FY19, Bonia has been streamlining its outlet/counter count, with a 17% decline since
then to 555 outlets (across Malaysia and other overseas markets), shuttering those
incurring losses due to slow brand growth and high operating costs. With these closures,
Bonia is able to shed loss-making outlets while implementing an omni-channel strategy
(including venturing into e-commerce) to grow its business. Particularly in Malaysia, Bonia
aims to open more boutique-type stores (4 to 6 new outlets in the next two years),
especially in strategic locations (high footfall). These outlets will carry more contemporary
designs to boost consumer appeal as part of its ongoing rebranding exercise.
Growing overseas contribution via e-commerce
Bonia will continue to leverage on e-commerce (7.9% of 1HFY6/22 revenue, 22% yoy) as
part of its expansion plans for local and overseas markets. Efforts include digital marketing
and further enhancement of its social media brand presence. For its overseas markets,
Bonia plans to expand its online marketplace presence by collaborating with synergistic
partners (other third-party online marketplaces and e-commerce service providers). We
also gather that Bonia is looking to embark on social commerce (TikTok) as another sales
channel in its omnichannel sales strategy.
Retain Add with a higher TP of RM3.00
We raise our FY22-24F EPS by 19.7-38.5% to account for higher-than-expected sales and
better economies of scale. Hence, we lift our TP to RM3.00, still based on 15x CY23F P/E
(in line with its 10-year historical mean). We view Bonia as a strong proxy for a recovery in
consumer discretionary spending. Current valuations are attractive at 10.9x CY23F P/E .
which is at a 60.7% discount to consumer discretionary sector’s CY23F P/E of 28.7x. It has
net cash of RM29m (14.4 sen/share at end-2QFY22).