Siam Makro

Siam Makro Plc 

 

3Q15 net profit was Bt1.2bn (Bt0.26/share), +15% YoY and +7% QoQ. Profit was 4% above SCBS and consensus estimates on a better gross margin than anticipated (+82bps YoY). The growth was backed by aggressive store expansion and margin enhancement that more than made up for the slight fall in SSS. Its 9M15 accounts for 67% of our full-year forecast (vs. 69% over the past five years), and we maintain our estimates. 4Q15 is poised to be this year’s best from seasonality. We like MAKRO for its 2-year EPS growth of 21%, powered by a better margin and continued expansion. We maintain BUY with mid-2016 DCF PT of Bt50. 

 

3Q15 Highlights: 

 

 Revenue improved 10% YoY to Bt37bn, with store expansion sufficient to make up for a slight SSS contraction. 3Q15 SSS dropped by 0.7% YoY (vs +3.8% in 3Q14 and  -0.9% in 2Q15), hit by poor sentiment and some store cannibalization. In 3Q15, MAKRO opened five new stores: two cash & carry stores in Nakhon Si Thammarat and Phayao, two food service stores in Rayong and Srinakarin in Bangkok, and a new food shop store in Town-in-Town in Bangkok. This brought total stores to 88 (cash & carry, small food service and food shop stores) at end-3Q15 vs. 70 at end-3Q14 and 83 at end-2Q15 (+26% YoY and +6% QoQ).  

 

- Gross margin jumped 80bps YoY to 11.6%. This reflects better product mix from more sales to the high-margin food segment and HoReCa customers and the absence of provision expenses on chilled foods recorded in 3Q14. 

 

- SG&A to sales was 7.5%, +50bps YoY, from a rise in expenses tied to its expansion, i.e. costs of opening of new stores, plus new project development expenses. 

 

- Interest expenses jumped to Bt62mn, +36% YoY, on funding obtained for its more active expansion.