We maintain our BUY recommendation on Bison Consolidated (Bison) and a higher fair value of RM2.70/share (from RM2.24/share previously). We roll over our valuations to

We maintain our BUY recommendation on Bison Consolidated (Bison) and a higher fair value of RM2.70/share (from RM2.24/share previously). We roll over our valuations to FY18F, pegged to an unchanged PE of 27x, which is in line with 7-Eleven Malaysia (7E Malaysia). Earnings were above ours and consensus estimates at 61% and 53% respectively. We continue to like Bison for its growth, driven by an aggressive expansion plan, and supported by an excellent execution track record. Heading into FY19, there could be a potential margin enhancement underpinned by its own in-house food processing centre.

Bison reported a 2QFY17 core net profit of RM6.2mil (QoQ: -2.5%) brought cumulative earnings to RM12.6mil (YoY: 28.6%). The declared dividend of 2.0 sen/share was above our expectations. Bison’s QoQ revenue growth of 4.0% was supplemented by the 4.8% higher store count or the additional 15 new stores against the preceding quarter. It brought the total store count to 325 stores as at the end of April. Cumulative top-line growth was in tandem with store addition as well. Bison remains on track for an addition of 70 new stores for the financial year.

As a result of healthier margin assumption, our earnings forecast is adjusted upwards by 10.5% and 5.4% for FY17F and FY18F respectively. Key risks to Bison include: 1) excise duty hike to cigarettes, which lowers foot traffic and related spillover spending; 2) delay in food -processing centre set-up; and 3) tightening of foreign labour regulation.