Courts Asia May Seek Acquisitions on Plans for New Markets

Courts Asia Ltd., Singapore’s biggest electronics and furniture retailer, may seek acquisitions and add new markets after opening its largest store in Indonesia next year.

The company is counting on its big-box strategy of building standalone stores to boost growth, Chief Executive Officer Terry O’Connor said in an interview in Singapore yesterday. It has 72 outlets in Singapore and Malaysia, and plans to open a 140,000-square-foot retail center in Indonesia next year, its first in the country.

“A fourth market is definitely something we’re interested in,” O’Connor said. “We like Philippines. We also like Vietnam, which has recovered and coming back up.”

A rising middle class, or those with disposable income of $3,000 a year, is powering spending in Southeast Asia, according to CLSA Asia-Pacific Markets. Most of the region’s 600 million people -- the combined population of the U.S., Germany and Brazil -- will be middle class by 2020, according to Bain & Co.

Courts Asia’s S$125 million ($99 million) bond sale last month will help the company expand over the next three years “with confidence,” O’Connor said.

“We’ve strengthened our war chest,” he said. “If M&A opportunities come up on the medium-term horizon, access to capital makes these a reality.”

New locations will only be added after the opening of its Indonesian outlet in eastern Jakarta in early 2014, he said.

Indonesia’s Growth

Record low interest rates, soaring stock prices and rising prosperity are boosting consumers’ ability and willingness to spend in Indonesia, said Enrico Tanuwidjaja, a Singapore-based economist at Royal Bank of Scotland Group Plc.

“The domestic consumption story will be an attractive one” for retailers, he said. “The numbers don’t lie. You have over 200 million people driving more than half of GDP.”

The Jakarta Composite Index climbed 19 percent this year, the best performer among the 10 biggest stock markets in Asia excluding Japan.

India will be a longer-term prospect, O’Connor said, as the market is dominated by single-brand retailers rather than companies like Courts Asia that sell products from different manufacturers.

The stock slumped a record 7.1 percent to S$1.055 at the Singapore close yesterday after the company said fourth-quarter profit dropped 19 percent to S$12.6 million.

The shares rebounded 0.5 percent to S$1.06 at the close today, compared with the benchmark Straits Times Index’s 0.9 percent decline. The gain added the stock’s advance this year to 23 percent, compared with the 4.5 percent advance in the Straits Times Index.

The company will add two stores in Singapore by the end of the year, and will open its first big-box outlet in Malaysia in August, O’Connor said.

“Such a store becomes a national draw card, offering a broader shopping experience,” O’Connor said. “Such a strategy also makes sense as you can build your own store far more competitively than you can lease one.”

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