Courts Asia

[specuvestor]

^^^ What was written was essentially what we had discussed in the past few months, including d.o.g's skepticism. Shouldn't be a surprise to forumers here

"Singapore contributes three-quarters of the Group’s revenues.We estimate that Singapore’s 13 stores (399,203sf) make Singapore the biggest contributor to earnings, despite the lack of higher-margin credit sales. Management does not disclose country profit breakdown but we estimate that Singapore is still ahead
as it has higher sales per sf in Singapore, and a more efficient cost structure"

Hi Cityfarmer

Please refer to my 4 months' old post #35 below. GM for Malaysia is higher but that is just one aspect. We have to take into account credit cost and sales psf. We also know that this is their 2nd venture into Indonesia.

In any case in the long run the market is a weighing machine. Many "voting" stocks have risen past 2 months, and Courts being an IPO stock is deemed as little technical resistance. So we'll see if this is another Challenger

IIRC when I met Courts a year ago, (which they subsequently aborted the listing), their main profit generator is actually Courts Megastore Tampines, which is 1/3 their sales and half their profit, or something like that. They also closed down a number of stores that were unprofitable. IIRC Singapore sales per square foot is like 10X of the neighbour. Trace back the history and not difficult to understand the turnaround. I haven't read the new prospectus, do correct me if I am wrong.

[dydx]

With today's (18Apr13) announcement I can't help but smell troubles emerging of again silly bankers at work doing the wrong things and lending a humongous amount of new money in one big go for perhaps the wrong company.....
http://info.sgx.com/webcoranncatth.nsf/V...00080785A/$file/CourtsAnnouncement180413.pdf?openelement

[felixleong]

wahhh still wanna take on more debt ah..
what is court's current gearing?
I remember its something like 50%++ liao right?

[CityFarmer]

wahhh still wanna take on more debt ah..
what is court's current gearing?
I remember its something like 50%++ liao right?

Base on 3rd Q report, Net debt / Equity is about 53%, so about there.

Since substantial sales (approx 20% IIRC) are from credit service, with higher margin. More debt is expected for expansion.

The credit service becoming more of a worry, than a concern to me

(not vested)

[CityFarmer]

Maybank KE report, TP $1.49 and BUY

We hosted a luncheon for Courts Asia’s CEO Terry O’Connor this week which was well-received by institutional investors. Following an introductory briefing on Courts’ evolvement and past problems, investors grilled them on current market positioning, plans for Indonesia, and its liquidity issue. We continue to view its ambitions to expand regionally in a positive light. Our TP remains the highest on the Street at SGD1.49 on this under-researched stock.

In the past, Courts had operations in Indonesia, Thailand, Singapore and Malaysia, where it had struggled with overexpansion and poor credit control. Now, management has centralised its credit system to make it independent of the country heads and refocused on credit quality control and collection, rather than aggressive credit recognition. Right now, 65% of sales in Malaysia and 10% of sales in Singapore are credit sales, with respective bad debt levels at their lowest in 5 years at 4.2% and 2%. When the quality of credit was questioned, management emphasised that the receivables placed in Malaysia’s SPV had to be rated triple-A quality to be accepted. To counter this, Courts has recently proposed establishing a SGD500m multicurrency debt program to expand on its credit drawdown at more favourable rates, depending on the risk appetite of investors.

Indonesia’s potential reemphasised. Growth prospects were a hot topic during the luncheon and management highlighted that the strongest growth is expected to come from Indonesia, then Malaysia. Previously, Courts had operated in various parts in Indonesia, and although it remained profitable, it was not where consumer spending was strongest. This time around, Courts will only be focusing on one high consumption region – Jakarta. It will be opening outlets predominantly around Bekasi to fully utilise its joint warehouse with a Megastore store expected to open in 2014. Management expects this to break even within two years.

http://remisiers.org/cms_images/research...404131.pdf

[felixleong]

"Management expects this to break even within two years."

will take some time before we can judge them again ^^

[felixleong]

Court's gearing is getting higher and higher, investors do be careful



SINGAPORE – Mainboard-listed Courts Asia said on Wednesday that it will be issuing S$125 million fixed rate notes maturing in 2016 with a coupon of 4.75 per cent per annum.

Courts’ notes debut was strongly received by both domestic and offshore investors, and attracted an order book of S$2.1 billion and 92 investors, said Mr Jason Khoo, Head of Debt Capital Markets South East Asia at HSBC, one of two joint lead managers and bookrunners for the issue.

“This successful exercise shows the strength of the Courts brand and the faith of investors. We are now well positioned to look at the next three years with confidence as we seek to execute on our vision for Courts in Asia and implement our strategic plan,” the company’s Executive Director and Group Chief Executive Officer, Mr Terence Donald O’Connor, said.

Courts, a leading retailer in Asia with more than 70 stores across Singapore and Malaysia, plans to expand into Indonesia by next year.

Net proceeds from the issue will be used to repay existing borrowings and finance the general corporate purposes.

The notes come under its S$500 million Multicurrency Debt Issuance Programme established on Tuesday and are expected to be issued on May 2.

The notes will be payable semi-annually in arrears and have a tenor of three years.

DBS Bank and HSBC are the joint lead managers and bookrunners.

[dzwm87]

Court's gearing is getting higher and higher, investors do be careful

The gearing is fine. Besides, part of the S$125mln is used to refinance existing borrowings. So gross debt is not simply the aggregation of the new and existing one.

IMO, 4.75% fixed rate at a 3 year maturity is a pretty decent re-financing plan.

[CityFarmer]

Court's gearing is getting higher and higher, investors do be careful

The gearing is fine. Besides, part of the S$125mln is used to refinance existing borrowings. So gross debt is not simply the aggregation of the new and existing one.

IMO, 4.75% fixed rate at a 3 year maturity is a pretty decent re-financing plan.

Net gearing of more than 0.5 is a concern IMO, especially so for mostly the unsecured credit business the company is engaging.

The gearing will continue to increase to support the expansion plan IMO

One good news is the interest rate of 4.7% is definitely lower than the loan borrowed from Malaysia, with KLIBOR based loan of 6-7%.

[felixleong]

Courts’ notes debut was strongly received by both domestic and offshore investors, and attracted an order book of S$2.1 billion and 92 investors, said Mr Jason Khoo, Head of Debt Capital Markets South East Asia at HSBC, one of two joint lead managers and bookrunners for the issue.

Demand over 10 times of supply, how come they couldn't price the interest rates lower? say 4 to 4.5%?