Excerpts from DBS Vickers report
 Photo: http://www.marketing-interactive.com/Courts Asia [COURTS SP; BUY, TP: S$0.44]. We are positive on Courts as we now see value in the current share price. Valuation looks low at 0.6x P/B, 7x FY17F PE -1.5SD of its mean 3-year PE valuation and below peer forward PE average of 10x. The stock also has a dividend yield of over 5%. Courts is also showing signs of earnings turnaround in FY16F. After posting dismal FY15 earnings due to sales declines and higher labour and rental costs across Singapore and Malaysia, we have seen a Malaysia-led FY16F recovery, especially in credit sales while allowance of impairment of trade receivables remains relatively stable at 3%-5% of total receivables. |
| "The business is capable of delivering S$15m to S$30m in net profits and operating cashflows of up to S$25m. At -1.5SD and below peer average valuations, we believe privatising the stock can be an attractive proposition for Singapore Retail Group, its major shareholder." -- DBS Vickers |
9M16 earnings have already outperformed 9M15 by 49% y-oy. Furthermore, its share buyback exercise has now led to a further 2.5% accretion to our EPS estimates, which we find significant vis-à-vis our core net profit growth of 4-6%.
Following a takeover offer for OSIM, we believe Courts could be a possible privatisation target.
Major shareholder Singapore Retail Group has close to 73% stake in Courts. The outlay required to acquire the remaining shares does not seem excessive, in our view.
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