CFA Society Singapore
SINGAPORE (June 13): Phillip Securities Research is initiating coverage on Malaysia-based marketing services provider shopper360 with a “trading buy” recommendation and a target price of 33 cents.
The target price is more than 83% higher than shopper360’s last traded price of 18 cents on May 8.
The brokerage’s coverage initiation comes despite shopper360 losing its CEO just two months ago.
The company on Apr 17 announced that then-CEO Samuel Chan had resigned voluntarily amid an internal investigation of alleged misconduct. It did not disclose further details on the investigations nor the nature of the alleged wrongdoing.
Group managing director and executive chairman Chew Sue Ann will assume the role of CEO while the group searches for a suitable replacement, shopper360 said in a filing to SGX.
“Management noted that the recent negative news on its regional director, Mr Samuel Chan, does not have any impact on the group’s financial and business operations,” says analyst Soh Lin Sin in a report on Wednesday.
In the 1H18 ended November, the group reported a 31% rise in earnings to RM 4.6 million ($1.53 million), on the back of the disposal of loss-making Paragon Premium.
Soh believes that shopper360 could see a stronger FY19, driven by new contracts with higher margins. She forecasts that shopper360’s core earnings will grow at 20% per annum in FY18-19.
“New customers acquired, including the media concession rights for Shell and MyNews, creative agency contract for Burger King Singapore, as well as media reseller rights for Spotify Malaysia, provide visibility of earnings for FY19,” Soh says.
At the same time, the analyst opines that the group could capitalise on the potential of Myanmar’s fast-growing market.
“We believe that its strategic partnership with Pahtama Group – Myanmar’s leading modern retail chain – provide S360 first mover advantage in Myanmar,” Soh says.
“Rising consumer affluence, increasingly sophisticated consumer as well as intensifying competition in Malaysia, Singapore and Myanmar would drive higher demand for marketing and promotional activities,” she adds.
In addition, Soh notes that shopper360 is currently trading at an attractive valuation, below its IIPO price of 29 cents in June last year.
“Adjusting for the listing and listing related expenses, it is currently trading at trailing 12-month price-to-earnings ratio (P/E) of 5.8 times, as compared its global peers’ average trailing 12M P/E of 13.0 times,” she says.