Robinson Department Store

Robinson Department Store Plc (ROBINS)

 

ROBINS reported 2Q14 earnings of Bt440m, down by 1.5% YoY and 18% QoQ. The figure was 5% below our estimate, due to lower-than-expected department store sales and margin.

Results highlights

Sales declined 1% YoY to Bt5.5bn, while same-store sales slipped 7% in 2Q14, deeper than our estimate of a 3% contraction. Weak spending sentiment, the impact of the curfew and cannibalization within the group were behind the weak same-store number.

Gross margin slimmed by 46bps YoY to 24.5% in 2Q14, as ROBINS launched more promotions to attract spending. 

The effect of the weaker department store operation was mitigated by increased rental income and profit-sharing from Power Buy and Super Sports. Rental income jumped 41% YoY to Bt439m following the openings of four Life Style malls last year. This strong rental income growth also pushed up EBITDA margin to 15.8% in 2Q14 from 15.5% in 2Q13.

Equity income from Power Buy doubled YoY to Bt57m, thanks to the FIFA World Cup and the launch of digital TV, while profit-sharing from Super Sports grew a hefty 39% YoY to Bt64m, driven by sales of high-end sporting apparel and shoes. 

Outlook

Although the third-quarter is normally the weakest season of the year, we expect earnings to improve QoQ, led by improving shopping sentiment. Strong YoY and QoQ growth should manifest in 4Q14.

What’s changed?

We have trimmed our FY14 earnings forecast 2% to reflect actual 2Q14 results. Our YE14 target price stands unchanged.

Recommendation

ROBINS is a good recovery play (starting 4Q14) and has an attractive valuation. It currently trades at PERs of 31x for FY14 and 22x for FY15, versus peer averages of 32x for FY14 and 26x for FY15. We have a BUY rating with a YE14 target price of Bt66.