"Ultimately, we are still cautious on the group’s prospects, owing to its unexciting sales performance amid heightened competition in fashion retail.
"We raise our FY20-21E EPS estimates by 24%/5% mainly on margin improvement and normalising tax rates," it said.
Bonia has experienced multiple consecutive quarters of sales declines owing to more challenging business conditions after the implementation of the GST as well as heightened competition in the retail market.
The group's same store sales growth (SSSG) continued in 9MFY19 with only the Braun Buffel outlets recording positive momentum, said the research house.
"We believe an organic sales recovery might not transpire at least until 2HFY20, given the lack of encouraging signs observed thus far.
"Because of that, we foresee earnings at the PBT level to be largely flattish in FY20," it added.
However, the elevated taxation issues related to an alleged VAT shortfall at the group's Indonesia operations should be resolved, resulting in higher core PAT growth next year, it said.
According to Affin HWang, the recent earnings decline in 3Q19 was lower due to the cost-reduction initiatives including the consolidation of outlets and staff expenditure.
The research house noted that the net closures of outlets especially the consignment counters have been largely completed after a three-year consolidation and realignment phase.
It added that the group is looking to increase net openings of boutique stores and counters in FY20, accompanied by higher advertising and promotions to raise its brand presence.
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