IPO ... Bjretail

Currently there are about 1150 7-Eleven stores nationwide, of which 615 stores are in the Klang Valley and 116 in Johor. Its target is to have 2000 stores within five years.

An increase in the number of stores would mean an increase in sales revenue. For FY2009 ended Dec 31, 7-Eleven achieved a sales revenue of RM1.185 billion and profit after tax of RM25.4 million.

On top of opening new stores, 7-Eleven is looking providing charged services.

The retail business is generally perceived to be highly competitive. However, 7-Eleven hast he lion’ share of the convenience store market in Malaysia due to the government’s ban on the entry of foreign convenience stores.

Apparently, about 60% of the sales in 7-Eleven stores is generated from 7pm-7am. This 7-Eleven is not competing directly with the hypermarkets and traditional sundry shops.

In short, BJRetail’s convenience stores business is in the high growth market where competition is minimal, at least for now.

Nonetheless, 7-Eleven is no the only growth story in BJRetail, in which Tan Sri Vincent owns a 51.8% stake after its listing exercise. BJRetail also sells sewing machines, home appliances and furniture under Singer brand and distributes motorcycles.

Singer provides micro consumer credit to customers who purchase its home appliances. Barely 15% if its sales are in cash. The bulk of sales is on credit and paid off in installments. The provision of credit facilities is another income stream for BJRetail.

In future consumer could become a major income avenue for BJRetail should the company manage to raise more working capital to expand such bueiness.

The company’s non performing loans represent only 4% of Singer’s total sales revenue.

Valuation …

BJRetail’s IPO price is at 50 sen per share. This implies a PER of nearly 22 times based on pro forma EPS of 2.3 sen for FY2009 ended Dec 31.

Convenience stores contributed nearly 75% to BJRetail’s revenue and 64% gross profit of rm490 million.

The valuation is steep in terms of PER, which is close to that of Parkson Holdings. The profit margin that BJRetail is slim.
RHB: 51 sen; Kenanga: 0.49; TA: 53 sen

Furthermore, the potential shareholding and earnings dilution as a result of the conversion of a chunk of icps. There are 962 million ICPS BJRetail. Than through his investment vehicle Premier Merchandise Sdm Bhd, holds nearly 92% of the ICPS while cosway owns 7.7%. The ICPS were iseud when BJRetail acquired 7-Eleven and Singer from Tan and Cosway Corp respectively.

Plans are already in place to list Berjaya Food which houses Berjaya Roasters Sdn Bhd and Berjaya pizza Co Sdm Bhd.