Robinson Department Store

Robinson Department Store Plc (ROBINS)

  

- 1Q15 profit to stay flat 

We estimate 1Q15 net profit at B536m, falling 10%qoq and staying flat from 1Q14 due to low season. Rental income is projected to leap by 46%yoy, mainly from five new Lifestyle Centers with more leasable spaces opened in late 2014. Still, income from sales would be depressed by weakening purchasing power. Same store sales are expected to fall by 4%yoy; including sales from new branches, total sales are projected to stay flat from 1Q14. Normalized margin is expected to slip from 1Q14 by 30bp. Despite higher high-margin rental income, gross margin from sales would drop from 1Q14 by 40bp as a result of the closing-out clearance sale at Robinson Ladya. SG&A/Sales is likely to increase as a result of higher depreciation from newly-opened branches (27% of SG&A). Share of profit from associates (Supersports and Power Buy) is expected to stay flat. 

- Profit to rebound in 2H15 

ROBINS's profit is expected to rebound, especially in 2H15. Sales are likely to rebound in 2H15 owing to the economic recovery; same store sales are projected to rise by 3%yoy. Besides, three new Lifestyle Centers will be opened in 2H15 (one branch in Rayong will be opened in 1H15), boosting not only sales but also rental income by at least 30%yoy. Overall, FY2015 profit is estimated to grow by 17%yoy. 

- Attractive price 

ROBINS's fundamental factors are strong, and the company focuses on department stores in other provinces, where competition is not very fierce. With P/E ratio of 23.6x (lower than the sector's average of 27x) and 33% upside, the price has been attractive. We reiterate BUY, especially for long-term investment (over six months). 

ROBINS is likely to outperform the market because it would be affected by the future economic recovery more than peers.