Bonia’s aggressive advertising prompts cost assumption adjustments
KUALA LUMPUR: Bonia Corporation Bhd’s (Bonia) aggressive advertising and promotion (A&P) activities in its last quarter prompted AmInvestment Bank Bhd (AmInvestment Bank) to adjust its cost assumptions going forward.
In a report, the bank saw that Bonia’s results for the first quarter of financial year 2018 (1QFY18) results had come in at RM1.3 million with a softer revenue base of RM118.9 million, missing both theirs and consensus expectations by meeting only 3 per cent of fullyear earnings estimates.
The missed expectations were mostly due to the first quarter being Bonia’s seasonally weakest quarter given unfavourable Hari Raya timing against the previous corresponding period.
“The FY18’s Hari Raya-related spending will be recognised in 4QFY18 instead. Correspondingly, same store sales growth (SSSG) for Bonia contracted 19 per cent year over year (y-o-y) while Braun Buffel sales deviated with a nine per cent increase off the back of robust Singapore sales.
“Apart from that, 26 per cent fewer consignment counters y-oy also contributed to the overall decline,” guided the bank.
Earnings before interest, tax, depreciation and amortisation also saw diluted margins by 8.1 ppts to 6.5 per cent due to aggressive A&P activities from Braun Buffel’s 130th anniversary.
Looking forward, the aggressive A&P is expected to continue in the short-term.
AmInvestment Bank is adjusting their assumptions over Bonia’s more aggressive A&P and factor in a more conservative cost structure.
“As a result, we trim our FY18,19 and 20 earnings by 23, 18 and 18 per cent respectively. Key risks include accelerated operational cost, poor execution and softer-than-expected top-line recovery.