Bonia steps up overseas expansion plan

Bonia Corp Bhd plans to step up the pace of its overseas expansion, targeting new markets like China, Thailand and the Philippines to mitigate slower growth at home and Singapore.

The group also plans to accelerate new store openings in Indonesia, the market where it entered three years ago.

Executive director Datuk Seri Daniel Chiang says the group plans to open a total of about 10 to 15 stores for its financial year ending June 30, 2015 (FY15) for various brands that are under the Bonia stable.

In FY14, the group opened 20 stores including 13 in Malaysia, two each in Singapore and Vietnam, and three in Indonesia.

“It appears that that we are close to a saturation point in terms of increasing our sales in Malaysia and Singapore,” he explains.

“Of course we still can grow in the Malaysian market, because the economy is growing positively, but our growth would not be at an exponential rate,” he tells StarBizWeek in an interview.

Bonia is present in 16 countries including Taiwan, Brunei, Saudi Arabia, Myanmar, Vietnam and Indonesia.

It sells it products via the more than 1000 sales counters, typically in shopping malls and via its 164 boutiques.

Despite its overseas presence, sales in Malaysia and Singapore contribute the bulk of its revenue at about 92.4%, while 7.6% come from abroad.

For the past three years, Chiang says that Bonia has been allocating between RM20mil and RM30mil in capital expenditure for its local and overseas expansion.

Bonia recently made its foray to Cambodia by opening its first Bonia boutique in June with a size of 1,200 sq ft.

Chiang says the group had ventured abroad three years ago, where it expanded in a big way to Indonesia and Vietnam.

“We believe the gestation period in Indonesia and Vietnam is almost over, hence we are seeing better sales contribution from Indonesia and Vietnam,” he says.

He adds that the group is expecting 50% sales growth in Indonesia and 40% in Vietnam in FY15.

As of June 30, 2014, Bonia had eight boutiques and 65 counters in Indonesia, and 17 boutiques and 28 counters in Vietnam.

“We believe that these markets – Indonesia and Vietnam - will contribute positively to the company’s bottom line over the longer term,” says Affin Investment Bank in a report dated Aug 11.

It its recent report, Affin expects Bonia to continue strong earnings growth between 23% and 34% from regional store expansions, improvement in product mix and increase brand awareness.

On Thursday, Bonia reported a 34% jump in its net profit for FY14 to RM55.4mil from RM41.35mil in FY13.

Its revenue for the period increased to RM691.6mil, a 9.4% hike from RM41.35mil previously.

The group attributed its revenue growth to Braun Buffel and other licensed brands sales, as well as higher sales generated from its expansion in Indonesia and Vienam.

“Rapid expansion plans in Indonesia and Vietnam had resulted in sales generated from these two countries to improve and contributed 20% to the total increase of the group’s revenue,” Bonia says.

Bonia co-owns the Braun Buffel label. It acquired a 70% stake in Jeco Group, which holds the trademark for Braun Buffel in Asia-Pacific.

Aside from its flagship label Bonia, the group has two other major in-house brands include Sembonia and Carlo Rino.

Bonia also distributes clothing and footwear for other international brands, namely Santa Barbara Polo & Racquet Club, Austin Reed, Jeep, Pierre Cardin, Valentino Rudy, Renoma, Bruno Magli and Enrico Coveri.

With massive overseas expansion in the pipeline, it is not a surprise that private equity funds are eyeing a stake in the homegrown masstige retailer.

Bonia’s share price has doubled in the past one year.

The counter hit an all time high in July at RM1.55 from just 77 sen a year earlier.

The stock is trading at 13.48 times projected earnings, according to Bloomberg data.

It has been speculated that global luxury giant Louis Vuitton Moet Hennessy (LVMH), via its Singapore-based private equity arm L Capital Asia, was in talks with Bonia to acquire a stake in Malaysia’s leading brand for leather accessories.

Chiang, however, is quick to point that for the past two years, Bonia has been talking to various investors, not only LVMH.

“Private equity funds have been aggressive in this part of the region, but we felt that we have yet to maximised our own value.

“Hence, we want to give ourselves a chance to grow first,” he explains.

LVMH has been busy shopping for Asian fashion labels since three years ago, looking for brands that can offer luxurious designs and products, but at affordable prices.

The Bonia brands are also gaining acceptance in Middle Eastern countries – it has 14 stores in Saudi Arabia, will open its first boutique in Kuwait soon.

Bonia, which is targeting to achieve RM1bil in sales by FY15, is looking to re-enter the China market by next year to capitalise on the growing affluence in the country.

“China is a big market and a tough one, but it is the market that we want to have exposure by at least 2015,” he says, adding that the group is currently in a midst of negotiation with local partners in China.

“However, we are going to open our first store in Shanghai before Christmas this year,” he says.

Bonia withdrew its retail operations in China in 2012.

Chiang says that Bonia’s expansion in China this time around would be different as the group is hoping to venture there via joint-ventures with local parties.