Courts Asia expected to hit an earnings low in 2QFY14

Then 3 factors will lead a rebound.

Maybank Kim Eng said that it expects Courts Asia to hit a trough in 2QFY14, after which things should improve due to three factors.

First is a loosening in credit policy that will likely improve sales, particularly in its Malaysian market. Second, Courts Asia should see a short term boost in sales from the newly launched iPhone 5S. And third, the maiden store opening by FY3/15 in Bekasi, Indonesia should also increase sales.

Here's Maybank's full analysis of the three forward catalysts for Courts Asia:

One, Courts intends to loosen its credit policy gradually in Malaysia in upcoming quarters, having admitted an overly cautious approach. It will roll out new promotions to target the same customers that AEON has targeted with competitive rates. This will cause a slight drop in spread but will benefit its top-line sales. At this time, allowance for impairment loss is at a 25-year low of 5.1% so it can afford to be more adventurous.

Two, it will also roll out new credit promotions in Singapore to capture more foreign worker and employment pass holders.

Lastly, Courts’ first store in Indonesia has started piling works and is expected to be completed by FY03/15. Berkasi is a commuter city for Jakarta and is Indonesia’s most populated suburb with 2.6m inhabitants.