Robinson Department Store

Robinson Department Store

Event
- We expect incremental personal income to favour discretionary spending over spending on staples. Improvements in private-brand sales mix and the benign competitive environment should drive net profit growth by 27% CAGR, which in our view justifies ROBINS’s 27x 2013E PER. We maintain our OP rating on ROBINS and raise the TP from Bt72 to Bt82.
Impact
- 2012: Five new stores opened. ROBINS opened five stores in 2012, in line with its guidance. We expect the company to report strong SSS growth of 7% during the year, despite sales cannibalization at the soon-to-close Ratchada store by the new flagship Rama IX branch, which is located close by.
- 2013: Expect five new store openings. ROBINS plans to spend Bt4bn to open another five new stores, all in the provinces, and will close its Ratchada store (formerly its flagship store), in 2013. The company projects 8-9% SSS growth and 20-30bps gross margin improvement from an increase in house-brand sales. 
- Expect competition to remain soft. With the No. 2 department store operator, The Mall Group, planning to focus its expansion on the Bangkok market, we believe competition in upcountry shopping malls will remain soft. This should enable ROBINS to continue its aggressive expansion over the next five years. 
- Expect 4Q12 net profits of Bt758m, up 183% YoY, mainly driven by the low earnings base as a result of the flooding during 4Q11 and a potential insurance claim on affiliate PowerBuy (not-listed) that was affected by the flood damage.  
Earnings and target price revision
- We cut our 2012-14 net profit estimates by 3-9% to reflect lower-than expected SSS growth during the year. 

Price catalyst
- 12-month price target: Bt82.00 based on a DCF methodology.
- Catalyst: Improving SSS growth and better private-brand sales mix.

Action and recommendation

ROBINS trades at 27.4x 2013E PER.  With demand in the provinces growing and mild competition supporting the company’s expansion plan, we maintain our OP rating with a new TP of Bt82.