Big C Supercenter

Big C Supercenter (BIGC)
- 3Q13 profit the lowest but grows yoy despites weakest growth in many quarters
BIGC's 3Q13 profit is reported to make the year lowest at B1.377bn, falling
12%qoq due to raining season, but rising 33%yoy. Extraordinary items are as
follows: 1) One of BIGC's subsidiaries had closed down and liquidated the
business, so lower tax was recognized (from B380m/quarter to B41m in 3Q13).
2) B248m reversal of insurance receivable from flood was recognized as
expense, as actual was lower than booked claim. Notably, the remaining of
insurance receivable was B341m. 3Q13 normalized profit was not strong due to
weak purchasing power. Sale volume grew by 5.7%yoy, the lowest rate for 4Q,
due to the opening of new branches. Same store sales did not grow (the first
time in eight quarters). Moreover, BIGC's profitability fell because of fierce
competition, lowering gross margin by 0.4% and raising SG&A/Sales by 0.2%.
However, rental income and sales promoting income from suppliers grew by
25%yoy.
- 4Q13 profit year peak but not strong yoy due to high
competition in late year
9M13 profit made up only 68% of FY2013 earnings forecast, but we maintain the
forecast, as 4Q13 would make the year highest due to high season, and new
branches would be opened in the remainder of the year: one branch of
hypermarket, five branches of BIGC Market, 29 branches of Mini BIGC and 20
branches of Pure Pharmacy. However, BIGC's 4Q13 profit is not likely to grow
vigorously yoy, unlike 3Q13. Preliminarily, 4Q13 profit is projected to grow by
only 5-10%, as it is the time with the fiercest sales promotion, whereas
purchasing power is low. Main rival's (Lotus) did not have strong 2Q13-3Q13
profit (same store sales fell in both quarters), so Lotus is likely to promote sales
aggressively to boost its earnings in 4Q13.
- Share price reaches FY2014 fair value at B210. "SELL"
We derive FY2014 fair value (24x PER), revising up from B200 to B210.
However, as the price has reflected the fair value, and there is no supporting
factor to boost price for a short term, we reiterate "SELL".