Big C Supercenter

Big C Supercenter Plc (BIGC)

- 4Q13 profit not to prosper. Weak sales volume due to political turmoil
As a result of the political turmoil, BIGC's 4Q13 sales volume was reported at
B30.9bn, staying flat yoy, growing at the slower rate than 9M13 average growth
of 7%yoy. 4Q13 same store sales shrank by 4.7%yoy, the first contraction in ten
quarters (Lotus' September-November 2013 same store sales contracted by
6.9%yoy). Gross margin is projected to drop by 0.2%yoy to 15.1% and
SG&A/Sales is expected to increase by 1.3%yoy to 17.3% as a result of BIGC's
sales promotion to keep its market share while the economy is not preferable.
However, the pressing factors are projected to be compensated by other income
(commercial income sharing from VGI's advertising space business and support
from suppliers) that would grow by 30%yoy (close to 3Q13) to B1.1bn. Thus,
4Q13 net profit is projected at B1,938m, growing 3.3%yoy.
- Weak economy and competition to press FY2014 profit
We project FY2014 profit growth at 11.5%yoy (10% lower than the consensus),
which is among the retail sector's lowest (the sector's average growth rate is
18%). The political unrest has continued pressing the economy and purchasing
power without positive signal, especially in Bangkok, so over a half of BIGC's
total sales volume would be affected. Moreover, there has been fierce
competition, significantly pressing BIGC's profitability.
FY2014 other income (mainly support from suppliers) is not expected to grow
well like in 2013 (FY2013 other income is projected to grow by 34%yoy), as
suppliers are likely to be affected by the political unrest. We project FY2014
other income to grow from 2013 by 5%yoy.
- Price drops but expected PER higher than seven-year average
Though the price has already undergone correction, FY2014 expected PER is
21.6x, higher than the previous seven-year average expected PER of 19x. Also,
BICG's profit is not likely to be strong. We reiterate "SELL".