Robinson Department Store

Robinson Department Store Plc (ROBINS)

Consumption low, 2Q13 profit projected to grow only 10% yoy
Effect from consumers' decelerating purchasing power since Songklan, along
with closing of Ratchada branch, are projected to make 2Q13 profit insignificant,
falling 6% qoq and rising only 10% yoy. Sales rose 18% yoy, about 15% yoy
from the openings of new branches (5 branches opened in 2012, 3 branches
opened in 2013) and only 2% from sales in old branches, due to declining
purchasing power. Rental income leapt 17% yoy, along with Lifestyle Center
with more rental spaces, as there has been a new branch of this type
(Sakonnakorn). However, gross margin is projected unchanged yoy, as sales
promotions are needed to maintain sales and market share. SG&A/sales would
rise slightly by 10bps yoy to 22.7% due to recognition of expenses from new
branches in this quarter. Moreover, another pressing factor to the earnings
result is share of profit from subsidiaries (Super Sport and Power Buy), which
are projected to fall to B80m from B102m in 2Q12, as Power Buy's electronic
appliance sales has fallen implicitly despite gaining compensation from rise in
the sales of Super Sport.
- FY2013-2014 earnings forecast drop 21% and 22%, respectively
1H13 is projected at only 38% of total FY2013 earnings forecast and the
remainder of the year has seemed insignificant. Sales are likely to decelerate as
consumption has declined, making profit-making efficiency lower than predicted.
Sales promotion is needed to boost sales. Also, there will be clearance sales in
Bangrak branch in 3Q13, before 2-3 months maintenance shutdown (reopening
in November). These have pressed gross margin from rising 30 bps to falling 10
bps. Moreover, FY2013 sales is likely to be lower than projected due to the
closing of Ratchada branch and competition for customers in early phase for
Ubonratchathani branch, as well as effects on old branches, which are Hat Yai
and Chiang Mai branches that customers have been stolen in early phase due to
the opening of Central in 4Q13. Thus, we revise our FY2013-2014 earnings
forecast down by 21% and 22%, respectively. FY2013-2014 profit is projected
to rise 7% yoy and 22% yoy.
- Decreasing price reflects previous short term pressure, reiterate "HOLD"
The price during recent 2 months has dropped over 29%, reflecting short term
pressure from decline in consumption. Long term fundamental factors is likely to
be in uptrend due the opening of 5 new branched per year in next 4 years and
different marketing position, emphasizing on opening department stores in
provinces, where competition are low. We change our evaluation from PERbased
to DCF-based (9.5% WACC, 3% TV growth rate) to reflect long term
growth, getting new FV at B62, falling from B75. We reiterate "HOLD" for
recovery and positive factors.