Robinson Department Store
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Robinson Department Store Plc (ROBINS)
Slightly short of estimate
ROBINS reported a 3Q12 net profit of Bt380m, flat YoY but down 20% QoQ. The figure was 3% below our estimate due to lower-than-expected equity income.
Results highlights
SSSG was 4.1%, in line with our estimate, but total sales (20% YoY and 4% QoQ) beat our forecast, implying that sales at new stores (Chiangrai, Pitsanulok, Rama IX, Suphanburi, Mega Bangna) performed better than we modeled. However, the higher-than-expected sales were fully offset by slimmer-than-assumed gross margin (down by 76 bps YoY and 124 bps QoQ). So, ROBINS’ operation was broadly in line with our estimate.
Recall that the weak SSSG was attributable to cannibalization at Ratchada, renovation at Udonthani, road construction at Srinakarin, intensified competition in Bangkok and the fact that only a few new brands and collections debuted during the quarter. As such, ROBINS had to offer promotional discounts in order to stimulate demand and clear stock ahead of new collections arriving in 4Q12, which squeezed gross margin.
Equity income fell by 24% YoY and 41% QoQ to only Bt60m, due mainly to a poor Power Buy (40% holding) performance. Demand for electrical appliances dived with the final of the Euro 2012 soccer tournament.
Power Buy and Super Sports announced that they will pay inaugural dividends totaling Bt1.39bn to ROBINS in December. Although this won’t have any impact on the income statement, it will boost ROBINS’ cash on-hand substantially, which might prompt the firm to pay an extra dividend.
Outlook
We expect SSSG and margin to rebound strongly in 4Q12, led by new collections/model additions, stronger shopping sentiment during high season for spending and the low base effect. Furthermore, Power Buy’s numbers should recover with the arrival in stock of new gadgets.
What’s changed?
Our forecast and target price stand unchanged.
Recommendation
We believe the earnings hiccup period has already passed and ROBINS will resume robust growth in 4Q12 onward. We maintain our BUY rating with a YE13 target price of Bt76.
