Siam Global House

Siam Global House Plc  

 

4Q15 net profit was Bt189mn (Bt0.05/sh), +10% YoY but -11% QoQ, in line with our estimate and consensus. Excluding the extra loss of Bt27mn (FX loss of Bt20mn and steel inventory loss of Bt7mn), normalized profit was Bt215mn, +26% YoY and +20% QoQ. The improvement was backed by a wider gross margin (+260bps YoY, from better private brand and favorable sales mix) and moderate sales growth (+6% YoY, as expansion outpaced weak SSS of -3.5% YoY). GLOBAL announced a stock dividend of 20 existing shares: 1 new share and cash DPS of Bt0.046, XD on 15 March. We like GLOBAL for its continued gross margin improvement and aggressive expansion. Progress on its new investment in Myanmar in mid-2016 will add another catalyst for share price. We maintain BUY with SOTP PT of Bt13.5.  

 

4Q15 highlights

 

 Revenue was Bt4.1bn, +6% YoY, as store expansion outpaced SSS contraction. SSS shrank 3.5% YoY (vs. +1.3% in 4Q14 and -4.5% in 3Q15) mainly because of lower construction material prices (i.e. steel and lightweight concrete blocks) that overwhelmed higher volume. In 4Q15, it opened three new stores: Yasothon, Bueng Kan, and Pranburi, giving it 38 stores at end 2015 (+19% YoY and +9% QoQ).  

 

- Gross margin jumped to 18.1%, +260bps YoY, backed by the improvement in high-margin private brand and more favorable sales mix. Strategies for its private brand include appointing direct salespersons to push products and adjusting packaging and pricing. Regarding the change in sales mix, the portion of construction material sales (~30% of sales) fell upon a drop in construction material prices. Normally, GLOBAL records a fixed absolute margin (THB terms) by volume of construction material products. Thus, gross margin (% of sales) on construction material products improved. 

 

- SG&A/sales rose to 13.7%, +130bps YoY, from additional expenses from expansion.  

 

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