Why Courts Asia should be all eyes on Singapore now

Bigger earnings forecast than Courts Malaysia.

According to CIMB, given Singapore’s better profitability, its stronger SSSG should outweigh that of Malaysia’s faster store expansion by a significant amount. Malaysia’s retail-store expansion should also deliver less profits because it takes time for new stores to reach maturity.

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We demonstrate this in our calculations below. We assume 10% SSSG for Singapore, an increase over FY13 spurred by a spike in completed housing units.

Malaysia’s SSSG is assumed to be 6.2%, no change from FY13. No change to country operating profit margins.

Singapore’s strong SSSG should be spearheaded by a large number of housing starts due to be completed over the next 3 years. Minister of National Development, Khaw Boon Wan, earlier addressed the country’s housing imbalance in the government’s Budget Debate 2013.

‘First we increase supply dramatically. An exceptionally large number of homes are currently being built. We will begin to feel the impact this year when 30,000 units are completed…but the full impact will kick in from next year, when 50,000 units are completed, followed by 54,000 units in 2015, and 63,000 units in 2016.”
– Minister for National Development, Khaw Boon Wan, Mar 13

While a sustainable level will probably be close to 15,000 as that is the number of new family formation a year, the housing imbalance over the next three years should provide rich pickings for Courts, as the market leader in electronic, household and IT goods.