Research house upgrades Bison to ‘buy’

PETALING JAYA: Inter-Pacific Research Sdn Bhd has raised the convenience store operator Bison Consolidated Bhd to a “buy” call with a fair value of RM2.08, due to the recent fall in the share price, which restores enough upside potential.
In a report last Friday, Inter-Pacific Research said going forward, the research house remains positive on Bison’s expansion plans and confident of its performance.
“Bison’s performance stayed stellar, with profit-after-tax (PAT) chalking up 34% year-over-year growth for financial year 2016 (FY16). FY16 PAT grew 34.2% Bison’s FY16 PAT of RM18.1 million exceeded our forecast of RM16.7 million, 8.5% higher than we expected,” it noted.
Inter-Pacific Research said the earnings surprise was due to RM1.4 million interest income from its initial public offering proceeds invested in money market instruments.
“Gross profit margin improved from 34.3% in FY15 to 35.6% in FY16 coming from a better product mix,” it added.
The group has successfully opened the 70 new stores targeted for FY16 and successfully licensed two outlets in Myanmar at the Yangon International Airport.
The company targets to add 70 news outlets which will translate into 21% additional store fronts. Bison currently has 303 outlets and nine WH Smith outlets.
Inter-Pacific Research said the group’s FY16 average revenue per store clocked in at RM879,000, which was down from RM950,000 in the previous year.
The research house said it expects the average revenue per store would continue to dwindle, due to the company’s forced-pace expansion plans that results in some cannibalisation of revenue and the opening of more marginal locations.