The Three Numbers That Make FJ Benjamin Chic

fj benjamin logoIf you have ever looked longingly at a Celine handbag, eyed up a Girad-Perregaux timepiece or wandered into a La Senza store in Asia, then you have almost certainly been charmed by FJ Benjamin (SGX: F10). The brand-building company develops distribution networks for luxury and lifestyle marques.

FJ Benjamin delivers an acceptable Return on Equity for investors. At around 11%, it is about average for the Singapore market. It means that the company generates $11 for every $100 of equity employed in the business.

The company does not have a high Net Income Margin. At 3.5%, it may even be said to be quite low. It is significantly below the margins for Sheng Siong (SGX: OV8) and Dairy Farm Holdings (SGX: D01) and Old Chang Kee (SGX: 4ML). Of course, there is a big difference between retailing affordable spring rolls and the latest upmarket spring collection.

That said, FJ Benjamin is very good at making full use of its assets. The company, which also markets Converse and Guess, has over the last three years delivered above-average Asset Turnover. At 1.5, the company is generating $1.50 worth of revenue for every $1 of asset used in the business. The average for Singapore’s Straits Times Index (SGX: ^STI) is 0.5.

FJ Benjamin does, however, use a fair bit of leverage in the business. Its Leverage Ratio of 2.0 is higher than the average for the Singapore market, which is 1.7.

By examining the various parts of FJ Benjamin’s accounts it is easy to see how it retains its chic. Its Return on Equity of 10.5% is the product of a low Net Income Margin of 3.5%; an above-average Asset Turnover of 1.5 and a beefy Leverage Ratio of 2.0.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.