Bonia revives its brands to recover from pandemic


BONIA Corp Bhd has a brighter future as it revives its brands and tailors its goods to current market demands with the help of collaborations with local and international artists and the launch of more new products.

Walter Aw and Khoo Zhen Ye, analysts from CGS-CIMB Securities Sdn Bhd, stated that the fashion-based retailer is set to benefit from higher sales and a more profitable sales mix going forward and have thus assigned a target price (TP) of RM2.50 for its shares.

“While all retailers including Bonia suffered from Covid-19 and the various lockdowns to combat it, we believe the company has emerged from the challenges stronger. It has made concentrated efforts during this period to improve its long-term prospects, particularly in ‘re-modernising’ itself to win the appeal of today’s consumers”, the analysts wrote in a recent report.

They added that Bonia’s efforts to include more collaboration works with local and international artists, launching more new products based on current market trends, and more promotional and marketing activities has helped to boost its sales.

Bonia’s omni-channel strategy and growing digital presence have also helped to grow its online sales, with e-commerce sales making up 7.9% of its first quarter of the fiscal year of 2022 (1QFY22) revenue (0% in FY19).

This is thanks to investments on digital marketing and efforts to enhance social media brand presence. Besides utilising its own website, Bonia utilises third-party marketplaces to diversify its online sales channels, the analysts said.

“Given its efforts in the digital space, we believe Bonia will focus on an omni-channel strategy, rather than solely reliant on offline sales as before.”

Bonia has also witnessed a strong rebound in its physical store sales since lockdown measures were eased in 2QFY22, buoyed by pent-up consumer demand, which the analysts expect Bonia to sustain its strong sales over the new few quarters (2QFY22 to 4QFY22) backed by festivities, new product launches, and lesser competition (due to outlet closures and reduced marketing activities since the outbreak of Covid-19) in the relatively same category.

The analysts added that Bonia has worked on consolidating its brick-and-mortar by closing loss-making and/or less profitable retail outlets and counters, which has enabled Bonia to optimise its resources more efficiently.

Yet, Bonia still plans to add more boutique-type stores (four to six new outlets in the next two years) especially in strategic locations (high footfall) which would fetch higher margins and aid its brand building.

“We keep our ‘Add’ call, with a higher TP of RM2.50, now based on 15 times CY23F P/E (10-year historical mean versus 0.5 times FY23F P/V previously), as we expect stronger earnings prospects for Bonia (three-year EPS CAGR of 23.7%).

“We view Bonia as a strong proxy for a recovery in consumer discretionary spending. Current valuations are attractive at 10.5 times CY23F P/E (66.8% discount to consumer discretionary sector’s 28.7 times) and 13.4% discount to net tangible assets of RM1.79/share. It has net cash of RM20.3m (10.1 sen/share at end-1QFY22).”