by winston » Mon Apr 09, 2012 8:10 pm
not vested
AJISEN (CHINA) (00538) maintained at Sell, TP HKD8 by UBS
2012-03-23
UBS reported on AJISEN (CHINA) (00538) stating its Sell rating and target HKD8 with the following details:
Net profit came in at HK$350m, down 22% YoY, and 16% ahead of UBSe, mainly due to the swing of fair value adjustment on properties from –HK$14m in 2010 to HK$32m, Ajisen declared a final/special DPS of HK$0.023/0.098.
Including the interim DPS of HK$0.06, total DPS comes in at HK$0.18, or a 55% payout ratio.
January and February generated SSS growth of -24%, and the first two weeks of March generated below -20%, so Q112 SSSG is likely to stay below -20%.
Ajisen expects a turnaround in August with SSSG guidance of 15-20% for 2012. We view the company is too optimistic on traffic recovery, and we forecast 10% in 2012.
EBIT margin came in at 15.9% (vs UBSe: 14.4%), mainly due to the lower-than-expect rental cost to sales. We expect further improvement on rental cost to sales, but it should be largely offset by the rising A&P cost, leading to a flat EBIT margin of 15.9% in 2012E.
Nonetheless, we expect a better EBIT margin trends to reach 16.7% in 2014E, and raise EPS estimates 6%/3%/2% in 2012/13/14E.
We raise our price target 8% to reflect the earnings upgrades. We derive our price target from a DCF based methodology and explicitly forecast long-term valuation drivers using UBS’s VCAM tool.
Trading at 27x 2012E PE with high uncertainties on sales recovery and earnings, we view the stock is overvalued. Therefore, we maintain our Sell rating on Ajisen. (t)
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