How Courts Asia's earnings will be hit by JEM closure

Earnings forecast slashed by another 8%.

According to Maybank Kim Eng, despite having cut its FY14F forecast in its previous note, it is reducing it further by 8% to account for the closure of the JEM shopping mall where Courts’ latest Singapore store is located.

Here's more:

Despite opening only in Jun 2013, a collapse of a ceiling on 20 Sep 2013 forced the closure of the entire mall and all 241 shop units.

Expected to be closed indefinitely until safety checks are conducted, we are factoring in a one-month closure for now.

Not all gloom and doom. Having said that, management during the NDR pointed to some positive forward catalysts.

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.