Bonia’s short term earnings hit by weak consumer spending
KUCHING: Bonia Corporation Bhd ( Bonia) near term earnings could be weighed down by weak consumer spending and slowdown in domestic demand arising from the implementation of the Goods and Services Tax (GST).
Following a company’s visit, Affin Hwang Investment Bank Bhd (Affin Hwang) in a report yesterday said Bonia’s subdued sales in its core market, Malaysia, which made up 66 per cent of the group’s revenue in the first half of financial year 2015 (1HFY15) ended December 2014 could continue into fourth quarter of financial year 2015 (4QFY15) ended June post implementation of GST.
The research firm expects the situation to spillover into Bonia’s 1QFY16 for the quarter ended September potentially attributed to sluggish sales which might be dampened by consumers pulling back on expenditures, particularly on purchasing discretionary items.
As for 1HFY15, Affin Hwang observed that the group’s sales for its core market, Malaysia slipped 2.8 per cent y- o-y to RM231.9 million.
At the same time, Affin Hwang noted Bonia group’s same store sales in 2QFY15 ended December 2014 contracted eight per cent year- on-year ( y- o-y) against a decline of five per cent in 1QFY15 ended September 2014.
It opined that whi le preGST spending might provide a temporary reprieve for the group’s financial performance in 3QFY15 ended March, the sales figure might not be sufficient to compensate for a potential fall in 4QFY15.
Looki n g ahead, Af f in Hwang noted the group will be aggressively ramping up its advertising and promotional activities to establish brand awareness while refurbishing its existing store portfolio and consolidating its loss- making stores to improve its operations.
Meanwhile, the research firm said Bonia planned to close approximately 30 to 35 nonperforming counters in financial year 2015 (FY15) and shift its focus to boutiques.
With that strategy, Affin Hwang said the group expects to gain more control over its branding by beefing up its presence through additional seven boutiques.
The research firm noted the company’s focus to boutiques will portrays better brand perception against consignment counters while it could potentially offer six to 10 per cent higher gross profit margin.
On another note, Affin Hwang said Bonia’s overseas operations remains encouraging.
Bonia’s Vietnamese operations reported 42.5 per cent y- o-y growth in sales turnover to RM9.6 million while the company’s Indonesian operations recorded revenue growth of 13.6 per cent y- o-y to RM13.9 million during 1HFY15 financial reporting quarter.
Going forward, Affin Hwang envisages both the Indonesia and Vietnam markets to contribute to Bonia group’s top and bottom lines over time as the company foresees that those markets offer bigger opportunities for growth due to their expanding economies, rising middle class and increasing affluence as compared with both Malaysia and Singapore.
As for Indonesian market, Affin Hwang said Bonia group will continue with its store expansion with plans to open two more boutiques and eight counter stores in Indonesia due to the country’s expanding economy.
Bonia is believed to be able to capital ise on Indonesia’s strengthening economy and improved consumer sentiment to enhance its f inancial performance.
For the Vietnam market, Bonia is looking to open a multi-brand store to be called ‘podium’ which would feature a variety of its brands in one retail environment.