Robinson Department Store

Robinson Department Store Plc (ROBINS)

Investment thesis
We don’t think it’s too early to load ROBINS into portfolios, even though we expect the firm to deliver weak 4Q13 numbers. The market expects a poor performance for the quarter, while a recovery in late 1Q14 has yet to be factored into the consensus model. We think now is a good time to scoop up the stock at a discount. ROBINS now trades at a PER of only 22x for FY14, versus a three-year mean of 27x and current peer average of 24x. Our BUY rating stands with a YE14 target price of Bt64.
4Q13 will remain weak, but numbers should improve by late 1Q14
ROBINS will post another weak quarter for 4Q13. Besides the consumption slowdown, the opening of Central Chiangmai on Nov 14 presents a headwind for the firm’s SSSG, given that the Robinson Department Store in the city (at Central Plaza Airport) is one of its top-seller branches. We expect ROBINS’ 4Q13 SSSG to be 4-5%. The numbers should improve by late 1Q14, at which time the spending power of mid-income demographics will be topped up by excise tax refunds tied to the first-time car buyer scheme. Moreover, we expect a strong rebound in Power Buy’s profit in 2Q14, fueled by the launch of digital TV broadcasting and the 2014 FIFA World Cup.
Expansion on schedule
The firm has opened four new stores YTD and will debut another location in Surin Province on December 20. Next year, ROBINS will join hands with CPN for a project in Rayong Province; it will also self-develop another four branches under its Life Style mall format. Management confirms that it targets opening five new stores a year till at least FY16, which appears to be an achievable ambition. Ten locations have been identified, of which the land plots for five have already been secured (opening dates in FY14), while a couple of plots are currently the subject of negotiation for stores with tentative 2015 opening dates.
First overseas store likely in FY16
ROBINS may open its first ex-Thailand store in CPN’s I-City mall in Malaysia in FY16. This project is located in Shah Alam, 30km west of downtown Kuala Lumpur. Robinson would be a better match for local demand preferences than Central, given that demographics in the surrounding area are dominated by mid-income earners—its major target group. In our view, although overseas expansion entails greater risk and may negatively impact on ROBINS’ performance after the store opens, it would benefit the company over the long-term if it were to prove successful.