Jay Mart

Jay Mart Plc
2Q13A. Net profit of Bt95mn, +46% YoY and +23% QoQ, mostly from smartphone sales, beating our estimates slightly. J Asset met expectations, though JMT, its debt collection business, disappointed. JMART’s 2Q13A sales were Bt2.3bn, +32% YoY and +4% QoQ, with 1H13 accounting for 43% of our whole year forecast. SG&A expenses came down from lower employee and marketing cost QoQ. Despite the expected slowdown in private consumption, users will be upgrading to smartphones and tablets using the android operating system: JMART estimates more than 70mn handsets will need to be switched to 3G from 2G in 2014-2015, with many of those going for smartphone devices. Approximately 40mn smartphones using existing numbers were sold in 2011-2013. Therefore, the company is very confident that it will achieve sales growth of ~40% annually through 2015.
2013F. We estimate mobile phone sales revenue growth at 39% YoY to Bt10bn, with net profit growth of 59% YoY to Bt485mn. Mobile phone sales contribute 93.5% of total revenues; the rest comes from debt collection (50% gross margin) and space rental (16.7% gross margin). Overall gross and net margin are expected to remain at 13.5% and 3.7% respectively.
Valuation and recommendation. With 3G more readily available and more consumers switching to smartphones, we expect 2013-2015 to be golden years for JMART. We value JMART using DCF and derive a fair value of Bt34/share, equal to a PER of 25x 2014, benchmarked to peers and we continue to rate it a BUY.