Courts Asia gears up for an exciting 19% surge in profits

Revenue is also set to jump.

According to HSBC, Courts Asia is one of the largest retailers of electrical products, IT products and furniture in Singapore and Malaysia.

Here's more from HSBC:

It occupies the No. 1 market share in Singapore in 2011 by value (9.8% market share) and the No. 2 market share in Malaysia in 2011 by value (7.0% market share). In 2014, the company is planning to expand into Indonesia by opening its first store there.

Strong revenue growth and earnings potential: Courts has experienced strong revenue growth over the past two years and we forecast this to continue in FY Mar 2012-14.

We forecast group revenue will grow 15.2% in 2013e to SGD834m from SGD724m in FY Mar 2012.

Group 2013e EBIT will increase 18.3% to SGD71m from SGD60m in FY Mar 2012.

Group 2013e earnings will increase 19.0% to SGD47m from SGD39m in FY Mar 2012.

Expertise in financial products: Courts has substantial experience in assessing and providing customer credit. We estimate that 23.1% of 2013e group sales and around 45.9% of gross profit will come from credit sales.

Delinquency rates both in Singapore and Malaysia have been falling over the last three years due to credit improvement and monitoring measures.

Asset light business model: Courts leases large retail space and can sublease certain areas to other retailers which can provide additional revenue and flexibility in store design.

Regional diversification: Courts is expanding in high growth Southeast Asian countries including Malaysia, Singapore, and Indonesia.