This article first appeared in The Edge Financial Daily on December 19, 2017

Bison Consolidated Bhd
(Dec 18, RM1.49)
Maintain hold with a target price of RM3.00: Bison Consolidated Bhd’s results for its fourth quarter ended Oct 31, 2017 (4QFY17) were in line. Store openings were largely on track, having opened 62 stores in FY17 versus its internal target of 70. We tweak our FY18/FY19 earnings forecasts by +4%/+1%, assuming lower taxes on tax incentives enjoyed by its Multimedia Super Corridor (MSC)-status subsidiary.

Bison’s 4QFY17 core net profit (CNP) of RM5 million (+25% year-on-year [y-o-y], -14% quarter-on-quarter) took FY17 CNP to RM24 million (+25% y-o-y); the latter accounted for 98%/97% of our and consensus full-year estimates. As expected, no dividend was declared in 4QFY17 (FY17 year to date: two sen per share).

FY17 revenue grew 24% y-o-y, on increased contribution by new and maturing stores. Except for print media, all other product categories grew y-o-y. FY17 gross profit margin improved 0.9 percentage point to 36.7% on better sales mix, gains from economies of scale and higher marketing income. However, FY17 administrative expenses were higher (+26% y-o-y), in line with higher number of stores, staff and advertising and promotions. Coupled with a lower tax rate (FY16/17: 23.2%/21.2%) as its wholly-owned subsidiary enjoys tax incentives as a MSC-status company, FY17 CNP grew 25% y-o-y.

The company is now known as Mynews Holdings following a name change with effect from Dec 11. Largely on housekeeping adjustments and lower tax rate assumption for its MSC-status subsidiary, we raise earnings forecasts by 4%/1% for FY18/FY19. We also introduce FY19 forecasts. We assume net store openings of 75/70/70 for FY18/FY19/FY20. Maintain hold with a higher TP of RM3.00 (+55sen, unchanged 26 times CY19 price-earnings-ratio (PER)) on rolling forward valuations. — Maybank IB Research, Dec 18