Robinson Dept Store

Robinson Dept Store Plc (ROBINS)

Investment thesis: While we have a fundamental BUY call on ROBINS as a long-term investment, our short-term tactical play is to switch out of the stock and into CPN and CPALL. ROBINS’ performance will be weak in the short-term and may disappoint the street. A good time to re-load positions should be after 3Q12 results are posted in early November. By that time, all the bad stories would already be priced in, we believe.
Watch out for weak 3Q12: ROBINS’ performance in 3Q12 is likely to be weaker than we earlier anticipated (see our sector report on Sept 21). Previously, we thought 3Q12 SSSG would be 5% (versus a consensus estimate of 7-8%) and GM would be maintained YoY (versus a street expectation of a fatter GM). But based on a recent discussion with management, SSSG is likely to be lower than 5% and GM will probably decline both YoY and QoQ.
What happened? Apart from slow sales at three branches—Udonthani (under renovation), Ratchada (brands moving out) and Srinakarin (road construction)—which earlier prompted us to trim our 3Q12 SSSG forecast to 5%, overall sales softened more than we expected, as competition in Bangkok intensified and only a few new brands and collections debuted during the quarter. Moreover, ROBINS offered promotional discounts in order to stimulate demand and clear stock ahead of new collections arriving in 4Q12. We have, therefore, cut our assumption for 3Q12 SSSG to 4% and for gross margin to 24.1% from 24.5%.
Earnings forecast cut: Besides the disappointing operation at ROBINS stores, Power Buy (40% holding) is also expected to post a weak performance, as demand for electrical appliances dived with the final of the Euro 2012 soccer tournament. As a result, we have revised down our FY12 earnings forecast by 7% to Bt1.97bn and cut our YE13 target price to Bt76 from Bt78. Our FY12 earnings forecast is now 9% below the street’s. The consensus will probably cut its profit projection after the analyst meeting on October 11.
Quarterly preview: We expect a 3Q12 net profit of only Bt394m, up 6% YoY but down 17% QoQ. 4Q12 numbers should improve with new collections/model additions, stronger shopping sentiment during high season for spending and the low base effect.