CP All
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3Q14 core profit in line with model BUY
CP All Plc (CPALL)
Core profit in line
CPALL reported 3Q14 earnings of Bt2.7bn, flat YoY and up 19% QoQ. Excluding an FX gain of Bt237m, core profit would be Bt2.45bn, down 20% YoY but up 9% QoQ. The core profit was in line with our estimate but was 10% below the consensus. 9M14 earnings represent 73% of our FY14 forecast.
Results highlights
Revenue rose 6% YoY to Bt87.7bn, while same-store sales (ex-T&E) fell 4.5% YoY (versus our estimate of 1% slippage), due to weak consumption and an unsuccessful stamp campaign. The number of tickets declined 3% YoY to 1,219 tickets/store/day, and the basket size dipped 2% YoY to Bt62.
CPALL rolled out 149 CVS outlets in 3Q14, taking the 9M14 number of new stores to 536, equal to 89% of the full-year target of 600.
CVS product margin (ex-T&E) was 26%, flat YoY. A 10 bps YoY decline in food margin was offset by a 30 bps increase in non-food margin.
The lower-than-assumed SSS was fully offset by lower-than-expected SG&A expenses, which dipped 4% YoY to Bt14.3bn (ex-MAKRO) in 3Q14 on lower advertising expenses and fees related to the acquisition of MAKRO.
Outlook
Despite the low base, SSS looks set to remain weak in 4Q14, as the stamp campaign will last till late November. However, 4Q14 should be the first quarter since 3Q13 to see YoY profit growth, thanks to the low base set by acquisition fees.
What’s changed?
We maintain our forecast and target price unchanged.
Recommendation
Despite its weak performance, CPALL remains our favorite long-term BUY because of its strong fundamentals and promising growth outlook. In our view, a good time to take positions in the stock would be in late 4Q14, just before its operation starts shining again in FY15.
