FJ Benjamin

[winston]

Substantial shareholder Aberdeen Asset Management Asia Ltd has increased its stake in F J Benjamin Holdings Ltd from a deemed interest of 0.00% to 5.55%.

[millionairemind]

August 21, 2008, 6.01 pm (Singapore time)
FJ Benjamin reports 31% fall in 2008 profitBy UMA SHANKARI

Retailer FJ Benjamin said on Thursday that its full-year net profit fell some 31 per cent to S$14.8 million, from S$21.5 million a year ago, as it was hit by lower currency translation gains.

Group revenue grew by 33 per cent to S$342.4 million, from S$257.6 million a year ago. Other income, however, fell 49 per cent to S$7.2 million, from S$14.0 million in 2007, due mainly to lower currency translation gain of S$274,000 this year - compared to S$5.0 million the previous year.

As a result, operating profit declined by 21 per cent to S$17.2 million, from S$21.6 million a year ago. Exceptional gains in the previous year were boosted by a one-time gain of S$3.8 million arising mainly from the disposal of FJ Benjamin's headquarters building.

Earnings per share fell to 2.61 Singapore cents in 2008, from 5.69 Singapore cents a year ago.

FJ Benjamin declared a final dividend payout of 1.1 Singapore cents per share. Together with the interim dividend of 0.9 cent declared in Q2 2008, total dividend declared for financial year ended June 30, 2008 will be two cents per ordinary share - amounting to S$11.4 million - the retailer said.

Looking ahead, an uncertain global and regional economic outlook will pose a continuing challenge in the next 12 months as consumer sentiment weakens, FJ Benjamin noted. 'However, with a strong balance sheet, low gearing and healthy cash flows, the group is strategically positioned to perform satisfactorily in this environment.'

As part of its long term strategy, the group intends to continue expanding its own-house brand RAOUL overseas, it said.

[Blackjack]

So we finally have a closure on why its price has been sliding downwards for so long.

Market's always right eh?

[helios]

FJ Ben, their mid-level operation staffs always change.
i met some, after 3 months, they jalang to another company ...

[millionairemind]

So we finally have a closure on why its price has been sliding downwards for so long.

Market's always right eh?

Market always looks ahead...

But hor, last few days got increased selling from the chart... again, somebody got some information we don't. Playing field is not level in Singapore.

[helios]

Received an sms, that another marketing guy left the company < 1 year, from the fashion dept ... so zhun ... very routine trend for this industry.

[Blackjack]

Received an sms, that another marketing guy left the company < 1 year, from the fashion dept ... so zhun ... very routine trend for this industry.

Like a roving newscaster.

[helios]

yo, actually,

was chatting with Decarn and Pappy today ...

Pappy dissected the company a valuation of 0.18 @ 50% discount to its inventory ... must ask him to post his figures here.

Very likely, to see a long 3rd black marubozu?



- Weekly Chart reviewed on 22-Aug'08.

[helios]

Bell & Ross is on an advertising streak, their Adverts are everywhere in high society magz.

for those forumers who are with fashion & trends, basically there are 2 cycles in tropical countries: Spring/ Summer or Fall/ Winter. (we are in the latter now).

and for watches, the cycle annually starts from Aug-Sept onwards ...

i believe these cycles will affect the inventories.

as qxing has highlighted, it is to compare the ratio of inventory/revenue for the two periods ...

[la papillion]

FJ Benjamin released its full year results for FY08 recently. I’m not interested in this company though I’m interested in the business. I followed this company since a number of forum friends had or once had vested interest in this company, so I’m doing it for the intellectual challenge that it might pose.

The press release as usual gave a very clear summary of how FJ ben is doing. The headlines mentioned about the 33% increment in turnover year on year, while the net profit (excluding exceptional items) went down 17%. Dividend of 2 cts per share is also given. I’ve learnt not to rely so much on press release or any media statement but to do more detail and independent work on the financial statements itself.

Here are the key figures for FJben:

----------------------------------------FY08----------------FY07
ROE(%)---------------------------------10.6----------------10.8
Net margins(extraord. gains)--------------4.3-----------------8.3
Net margins(no extraord.gains)------------4.3----------------6.8
Total debts to equity (%)----------------91.4----------------52.9
Current ratio-----------------------------1.7----------------2.5
Quick ratio------------------------------0.93----------------1.73
EPS (SGD)------------------------------0.0261--------------0.0507

My take:

1. Big drop in the net margins while gross margins (not shown) remained almost constant. Two items caught my eye as I try to decipher what made the net margins dropped so much – rental of premises and depreciation of property, furniture, fixtures and equipment. The former increased by 59% while the latter increased by 80%. Why is there a big increase in depreciation? Rental premises increment is understandable as they opened 33 new stores in FY08. It sucks to have higher turnover of 33% yet net profit dropped by 31%, in my opinion.

Again, the low net margins make me rethink about the kind of business that FJben is involved. Im always amazed that the net margins of around 4% is not that different from Popular. Even excluding extraordinary gains in FY07, the net margins dropped from 6.8% to 4.3% in FY08.

2. Current ratio dropped in FY08, mainly due to a drop in cash and cash equivalents. The wide difference between current and quick ratio means that the bulk of current assets are held in inventories. Fashion is fickle, so it might not be such a good idea to look at current ratio but to look at quick ratio instead. FJ ben increased both current and non-current liabilities in FY08. Combined with the reduction in equities, this raised the total debt to equity ratio from 52.9% to 91.4%. I’m a little more worried about their short term liquidity problem rather than their long term problems. I think that their increased inventories could be due to more stores opening or that they have problems selling. Since I’m a brand idiot, the less I talk about their sales, the more intelligent I’ll look. Let’s move on.

3. ROE is almost constant from year to year. But a closer examination using dupont analysis suggests the underlying fundamentals contributing to the ROE had changed.

----------------------FY08-------------------FY07
Net margins(%)-------4.32---------------------8.33
Asset turnover--------1.29---------------------0.85
Financial leverage-----1.91---------------------1.53
ROE (%)--------------10.6---------------------10.8

Net margins drop from FY07 to FY08 is compensated by the higher asset turnover and higher financial leverage, causing the ROE to remain almost the same. This gives me an impression that FJ ben is having higher turnover but is not translating into higher profit due to costs. If you ask me, the ROE of FY07 is fundamentally stronger than in FY08, despite the ROE being almost the same.

4. EPS dropped from 5.07 cts in FY07 to 2.61 cts in FY08. This is inclusive of extraordinary gains of around SGD 3.8 million in FY07. Stripping that off, the EPS in FY07 is around 4.16 cts per share. Moving forward, with the world teetering on the threats of recession, it’s hard to foresee earnings figure improving in next year. There is always mention of IR and Ion orchard contributing to higher sales, but for me, let the performance of these catalysts speak for themselves. I’ll rather by pessimistic about their future results and be pleasantly surprised than be optimistic about it and get a rude shock.

Here are the EPS and ROE figures in past FY:

----------------------2003-------2004-------2005-------2006-------2007-------2008
ROE (%)-------------2%----------3%---------6%----------11%--------11%------11%
EPS (cents)----------0.52--------0.70--------1.50--------3.53--------5.07-------2.61


Valuation and price

Based on EPS of 2.61 cts per share and last closing price of $0.260, the PE is 10x. They gave a total of 2 cts per share dividend in FY08, thus giving a current dividend yield of 7.7%. This however, represents a payout of around 77% of EPS and the natural question of sustainability of the dividend arises. I'm not sure about their historical payout ratio though.



Looking at their historical PE, we can see a high historical PE of 34x and a low of around 5x. So, if we price FJben at a low PE of 5x, we'll get a price based on FY08's earnings of $0.130.

If we apply old Ben's strict net current asset value (using current assets - total liabilites then divide by shares outstanding), we'll get $0.140.

I calculated the NAV, it's 0.245 cts per share. But to be conservative, let's value the inventories at 50% of it's balance sheet value (why? I think 50% sales at Guess or Raoul would be very nice!), I'll get a bastardised NAV of $0.165 there. At this price, the PE is around 6x. Dividend yield will rise up to 12%. Yum yum

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Here's my blog post much earlier in Feb on Fjben: http://bullythebear.blogspot.com/2008/0 ... ll-do.html