Home Product Center

Home Product Center Plc (HMPRO) 

 

Earnings were as expected

HMPRO reported 4Q15 net profit of Bt1.14bn, up 11% YoY. The figure was consistent with our estimate and that of the consensus.

Results highlights

Total sales increased 8.7% YoY to Bt14bn. Sales at HomePro in Thailand grew 0.8% YoY to Bt12.2bn, while its SSS inched up 0.5% thanks to the windfall from a government measure to boost domestic consumption during the last week of 2015. The HomePro store in Malaysia contributed Bt127m for the quarter, up 123% YoY and 14% QoQ. 

Mega Home sales jumped 124% YoY to Bt1.7bn, driven by new stores and strong SSSG.

Despite greater sales contributed from Mega Home and a decline in the proportion of its house brand mix (18% in 4Q15 versus 20.2% in 4Q14 and 19.5% in 3Q15), gross margin still fattened by 10bps YoY to 25.7%, thanks to the better product sales mix.

The SG&A expenses/sales ratio dipped to 22.2% in 4Q15 from 22.8% in 4Q14 and 23.1% in 3Q15, thanks to improved performances of Mega Home and the Malaysian operation.

Rental and service income rose 26% YoY to Bt444m due mainly to new retail space at its Suvarnabhumi store after it completed renovations in May last year.

HMPRO announced it would pay a cash dividend of Bt0.15/share, translating to a payout ratio of 100% for 2H15 performance. XD will be on 12 April.

Outlook

HMPRO’s growth profile should gradually improve. Although sales should remain soft, economies of scale at Mega Home and robust rental income growth will be major factors to boost the bottom line in 1H16, while fattening gross margin after the remodeling of house brands is completed will drive profit further in 2H16 and FY17.

What’s changed?

Our forecasts and target price stand unchanged.

Recommendation

We view that the HMPRO share price is at a decent entry level. Its growth profile is improving, while the stock currently trades at a PER of 22.2x versus its long-term average of 25.3x. We maintain our BUY rating on HMPRO with a YE16 target price of Bt9.