Indorama Ventures

Indorama Ventures Plc (IVL) 

- 4Q13 net profit grows 8.5%yoy as expected due to political turmoil
4Q13 net profit was B927m, growing 28.8%qoq and 8.5%yoy as expected (3%
above consensus, but less than 9M13 average growth of 18%yoy), due to
seasonal effect. Though same store sales grew by only 2.7%yoy (versus 4%yoy
average in 9M13) as a result of the political turmoil, overall sales volume rose by
13%yoy thanks to the opening of new branches in 2013 (11 branches of HMPRO
and two first branches of Mega Home). Meanwhile, other factors were as
expected. 4Q13 gross margin increased from 4Q12 by 70 bps. However,
SG&A/Sales increased by 120 bps because of higher wage and sales promotion,
and loss from new branches was booked due to increasing operating cost.
Overall, 4Q13 net margin dropped from 4Q12 by 40 bps to 8.4%.
- FY2014 not strong due to slowing economy and loss from new branches
The economy has been slowing down as a result of the prolonged political
turmoil, so same store sales would still be affected in 1Q14. HMPRO's property
business would also be pressed, as the launching of new projects would be
delayed (sales from new houses makes up 20% of HMPRO's sales). Moreover,
total loss of B150m from new branches (from Mega Home and the first HMPRO
in Malaysia) scheduled to be opened in late-2014 (4% of total profit) would be
booked. We maintain our FY2014 earnings forecast. Conservatively, FY2014
sales volume (excluding Mega Home) is expected to grow by 14%yoy, lower
than 19%yoy average growth in the previous four years. FY2014 net profit is
projected to grow by 14%yoy (4% below consensus).
- 7 old shares: 1 dividend share with B0.02 cash dividend
HMPRO announced dividend payment at 7 old shares: 1 dividend share ratio
with cash dividend of B0.0159/share (deduction for withholding tax). XD date is
18 April, and dividend will be paid on 8 May. As a result of 12.5% dilution effect,
FY2014 EPS would drop from B0.37 to B0.32. Also, FY2014 fair value (DCF,
9.2% WACC, 3.3% TV growth) decreases from B9.5 to B8.3 after XD date. We
reiterate to hold for dividend.