Bell-Park (9441) FY12/09 Results
Our client Bell-Park (9441) reported the results after the close on Friday 10, 2010. The company forecast was exceeded by 5.5.% in terms of sales and 17.9% for the OP. This is pretty much what was expected, a very strong set of results.
The forecast for FY12/10 is calling for the sales growth of 19.4% and the OP decline of 21.7% for the full year, with substantially weaker 2H. I don’t want to speculate whether or not the forecast is ’conservative’ but the company has indicated before that the company normally has to assume lower margins at the beginning of each year. The reason for this is that strong unit sales (and resulting high profitability) in one year can be expected to lead to commmission rate cuts by the carriers (Softbank Mobile in case of Bell-Park) the following year. That does not mean it will happen. However, the company must assume it might happen and therefore forecast margin declines. In a similar fashion, for the unit sales growth, the company has no visibility into what will be offered to the market several months hence, especially when one talks about a new i-Phone. That’s why Bell-park has to assume that margins will deteriorate substantially and the unit sales will fall off a cliff in 2H of FY12/10.
Is the company being conservative? I am sure they will talk about it tomorrow at the results meeting but here are my few sentences. On margins (i.e. commissions), Softbank must be really keen to sustain its market share gains and to capture as many carrier switch-over customers as possible, without losing its own to Docomo and Au. That means that the incentives are less likely to be cut, in my view. This is not the company view; there is also a risk that Softbank would want to balance sales growth with its own profitability (i.e. cutting the commission rates). I personally think they will go for volume — currently there are enough profits for everyone and share gains are strategically important. On the new i-Phone, I have no direct line to Steve, but I suspect that Apple would want to continue developing the success of its wildly popular phone and that should mean new model launches in 2010.
In summary, Bell-Park’s forecasts are what they were supposed to be. They may turn out not to be conservative but mostly likely, they are. Please check our detailed report for the detailed discussion in few days. By the way, the stock is trading on 6.1x company forecast EPS.
