Fj Benjamin

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FJ Benjamin Holdings Ltd# (SGX: FJB) 18 July 2012
Receding tides at the fashion and timepieces retailer
UNDERWEIGHTTarget Price: S$ 0.09
Price (as at 18 July 2012) | Bloomberg| 12-month Range| Market Capitalization| S$ 0.33| SGD 0.3300| SGD 0.26 – 0.365| SGD 203 Million| 3 Points that convince us of a Sell rating:
* Something 1
Explanation

* Something 2
Explanation

* Something 3
Explanation
Year End: Jul| 3QFY11Results| 3QFY12Results| YoY %
Growth| YTD % as of FY2012|
Revenue (S$’000)| | | | |
Retail| | | | |
Distribution| | | | |
Licensing| | | | |
Gross Profit| | | | |
Gross Margin| | | | |
EBIT (S$’000)| | | | |
EBIT Margin| | | | |
Net Profit| | | | |
Net Margin| | | | |
EPS| | | | |
DPS| | | | |
NAV/Share| | | | |

Headquartered in Singapore, SGX-listed F J Benjamin Holdings Ltd. (FJB) builds in-house and develops international lifestyle and luxury brands across Asia and recently in the Western markets too. With a portfolio of over 20 celebrated brands, the group divides itself into four core businesses: 1. Luxury and Lifestyle Fashion Retailing and Distribution; 2. Timepiece Distribution;

3. Design and Manufacturing of their in-house brand RAOUL
4. Investing in Lifestyle Concepts

Section I: Industry Analysis
SWOT Analysis
Strengths
Wide retail network
FJB operates 191 stores across Singapore, Malaysia, Hong Kong and Indonesia in prime locations to cater to its premium customers and tourists and help maintain the competitiveness of the Group. Wide diversified luxury and lifestyle brand portfolio

The brand portfolio comprises over 20 iconic luxury and lifestyle brands. A diversified portfolio of scalable brands helps the Group mitigate the vulnerability of luxury brands in an economic downturn. Multilingual retail staff improves customer service

* FJB believes in investing heavily in retail staff training to increase service quality and language proficiency to serve tourists who visit the stores from various regions. Strong balance sheet and positive cash flow allow FJB to fund its CAPEX plans FJB maintained SGD7.7m of net cash at the end of FY2012 despite incurring capital expenditure rising by 8% due to the opening and refurbishment of stores Weaknesses

Geographic diversity and exposure to high tax rates
FJB Operates in 190 stores across the world. With many stores located in Malaysia and China, where the effective tax rate is close to 30%, FJB faces a high tax bill and thus lower overall profits. Highly cyclical earnings

FJB’s earnings are highly cyclical and they tend to peak in the late stages of a cyclical upturn. This translates into a risk of over expansion during good times. FJB’s total revenue increased 38% YoY for FY 2007. Poor presence and performance in Australia, Europe and North America FBJ classifies it’s geographical segments into South East Asia, North Asia and Other, which includes their franchised brands in North America and Australia. This segment has historically made up less than 2% of total revenue. Opportunities

Strong brand name of RAOUL
FJB’s proprietary brand was one of the brands topping the high fashion category in a recent Mystery Shopping Survey. It has grown well over the last few years as FJB was able to raise RAOUL’s brand value and expand the business to Europe and the United States.

New international brands to accelerate earnings potential
The Group is working to bring in affordable international fashion brands. Recently, the Group signed an exclusive distribution agreement with the Padini Group for VNC shoes to venture into the growing Indonesian market. Threats

Competition
The majority of FJB’s competitors operate with large store numbers (Esprit - 1,128, Dickson Concepts - more than 1,000, WINGT - more than 180, Metro - 879,000 square feet). The rise of blogshops in the SE Asia have also increased competition...
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