08 Feb 10:18AM : Eu Yan Sang ($0.395) - 2Q05 Results Review By Hui Min
  • No major surprises. 2Q net income came in flat at $3.2m on the back of a 17% yoy increase in sales to $41.1m. On a q-o-q basis, sales and net income were up 15% and 52% respectively. For the 1H05, EYS chalked up net income of $5.3m (+10% yoy), leaving us comfortable with our full year forecast of $10.8m.
  • Lunar New Year effect. At first glance, 2Q results may look weak due to flat yoy earnings growth. This is primarily due to the fact that 2Q04 captured peak festive sales when Lunar New Year fell in Jan last year. In FY05, the impact will be in the 3Q as the Chinese New Year festivities begin in Feb. Operating expenses rose 22% yoy in the 2Q05 as EYS incurred higher A&P expenses in addition to opening 4 new stores. The Group has also launched 10 new products in the 1H05.
  • Broad-based sales growth. Hong Kong, led the pack with a 19% yoy gain in sales to $39.5m in the 1H. Hong Kong makes up half of the EYS's total turnover. By business segments, retail sales (+17% yoy) were the key driver, contributing 65% to group's sales. Performance of the wholesale segment was flat (+3% yoy) in the 1H05 due to a change in business model in Malaysia. EYS is moving towards self-owned outlets to replace 3rd party wholesale counters in Malaysia.
  • Maintain Buy. No change in FY05-06 EPS. We continue to favor EYS for its strong business franchise and expect it to ride on the recovery in consumer spending in the regional markets, especially Hong Kong.

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