Court Asia profile, Chart with Support and Resistance

Courts Asia operates retail stores in Singapore, Malaysia, and Indonesia, selling furniture, electronics, and electrical appliances. The first two countries are Courts Asia’s key geographical markets with the company opening its first Indonesian store on Oct 2014.

11 Aug 2016

Aug 2016

Profit of $9.4 million for 1Q17, a 55.8% increase from the earnings of $6 million in 1Q16.
Revenue fell 0.9% to $196.3 million
- Singapore Sale 0.3% drop to $505 million.
- Malaysia Sale 5.8% decline in Singapore dollar terms to $248 million. In ringgit terms, Malaysia sales increased by 1.7%.
- Indonesia revenue rose 66.1% to $16 million, from newly opened stores.

CourtAsia back with a bang

We initiate coverage on Courts Asia (CAL) with a BUY recommendation and target price of S$1.19, implying a 48.8% upside from the current price. CAL’s impressive turnaround story and market leadership in Singapore and Malaysia makes it an attractive proxy for the growing Asia consumer market. We view a potential for significant upside ahead as CAL continues to carry out its transformation plan with a focus on improving the profitability and productivity of existing stores and further gaining market share and scale with new store openings. We forecast a 3-year (FY12-15F) revenue and EPS CAGR of 17.7% and 19.2% respectively.

An impressive turnaround. Courts Singapore (CSL) and Courts Malaysia (CMB) have been in operation since 1974 and 1987 respectively when the group’s shareholder went into administration in 2004. CSL and CMB were eventually sold off to a consortium of private equity investors and underwent a comprehensive restructuring plan, which includes the closure of unprofitable operations, store refurbishments and relocations, an overhaul of its credit infrastructure, and regional centralisation of management. As a result of these initiatives, CMB turned around from a net loss in FY08 to a net profit of S$13.2m in FY11. CSL grew its earnings 8x since FY08 to S$15.8m in FY11. Based on 2011 sales value, CMB and CSL occupy the #2 and #1 spots respectively in the industry rankings.

On the comeback trail. CSL and CMB were consolidated under CAL in 2010 as management continues with its transformation plan. We project

Courts Asia courting the right consumers

Courts Asia has a total of 70 retail stores in Singapore and Malaysia covering 1.2m sq ft of retail space. It recently launched an e-commerce site in Singapore.

Familiar household name. Courts Asia, a leading electrical and IT products and furniture retailer in Singapore and Malaysia, has relisted on Singapore’s main board after being privatised a few years ago. The group has some big plans up its sleeve. It plans to grow retail space by 11.6% pa, or 140,000 sq ft on average, in Singapore (ie, one store on average) and Malaysia (ie, six stores on average). It also aims to break into a new market by 2014, namely, East Jakarta in Indonesia. Interestingly, Courts Asia has reinvented itself not only as an electronics retailer, but also a short-term financier.

Solving a credit problem. Asia Retail Group, backed by Baring Private Equity Asia and Topaz Investor Worldwide, took Courts Singapore and Courts Malaysia private separately between 2007 and 2009. According to management, Courts was then grappling with credit collection woes in Malaysia. Courts Asia solved the problem by implementing