Robinson Department Store
Q2 2012's profit in line with projection. Very expensive and overvalue. Reiterate Sell
Robinson Department Store (ROBINS)
2Q12’s profit grows 22%yoy as expected, dropping 16%qoq though
Due to moderate economic growth in 2Q12 and a slight effect from the minimum wage raise and goods price hike, same-store-sales growth in the quarter stood a little lower than normal at 6%yoy
comparing to 8.8% in 1Q12. Including benefit from the opening of 4 new stores in 3Q11-2Q12, total sales have increased 22.3%yoy. Share of profit from associated companies (Super Sport and Power Buy) has risen by 21%yoy to B102m as a result of the economic situation. Gross margin has increased continuously from 24.5% in 2Q11 to 24.8% in this quarter from economy of scale and continuous introduction of new products that have high margin. However, these benefits and a corporate income tax cut to 23% have been offset by the effect from minimum wage raise for the first quarter, so SG&A/sales has increased from 22.1% in 2Q11 to 22.6%. Consequently, overall net margin in this quarter still stayed flat from 2Q11 at 9.5%, resulting in a profit of B474m or the growth of 22%yoy as projected.
Maintain forecast for profit growth of 43%yoy to B2,072m
Profit in 1H12 comprises 50% of our FY2012’s forecast, while profit in 2H12 is anticipated to be equal to 1H12’s. Profit in 3Q12 tends to weaken from 2Q12 on seasonal effect and the impact from a 2-week mega promotion of Siam Discovery and Siam Center in the beginning of the quarter which would have continual effects on ROBINS’s sales in Bangkok (40% of total sales) for a while.
Moreover, compensation claims for ROBINS and associated companies would still not be recognized in 3Q12. Nevertheless, the profit will hit the year’s high in 4Q12 from increasing spending during festive season and marketing promotion as well as the opening of 3 new stores in 2H12, which are Bangkae (3Q), Surat Thani (4Q), and Lampang (4Q). Accordingly, net profit in FY2012 would be in line with our projection at B2,072m or the growth of 43%yoy under an assumption for normal economic and political situations.
Share price standing on high expectation. Reiterate “taking profit”
Although earnings outlook in these 2-3 following years is bright, in the short term the share price has risen to reflect all positive factors until fully value while share prices of other companies in the sector have undergone a correction after 2Q12’s earnings declaration.
Reiterate Sell.
