Robinson Dept Store

Robinson Dept Store Plc (ROBINS)

Investment thesis: ROBINS is back at the top of our BUY list for retail space—its operation was not only less affected by the flooding than we earlier feared, but is likely to perform better than we assumed in our pre-flooding model. We think the current PERs of 24.9x for FY11 and 18.3x for FY12 are justified, given an FY12-14 profit CAGR of 24%. Moreover, we expect upside to our forecast, as we conservatively assume SSSG of only 7% for FY12-13. We reiterate our conviction BUY call on ROBINS with a YE12 target price of Bt44.
Momentum continues: Management said at the Opportunity Day yesterday that the flooding had only a minimal impact on its overall performance, as insurance covered business interruption at all three stores that were forced to close by rising waters in surrounding areas. The 21 unaffected outlets in both in Bangkok and the provinces reported stronger performances—numbers that were better than management expected. As such, the current robust SSSG (15.9% for 3Q11 and 14.3% for 9M11) should sustain momentum into 4Q11 and FY12. We have revised up our SSSG assumption for 4Q11 to 10% from 0%, resulting in a 5% upgrade to our FY11 profit forecast.
Sustainably high SSSG: We expect ROBINS’ strong SSSG momentum to continue for several more years, underpinned by a marketing strategy of branding in and rolling out a wider range of international fashion brands and premium cosmetics to more provincial stores. We see plenty of scope for premium brands to expand upcountry, where urbanization and changing lifestyles are generating greater demand for higher-quality products. Moreover, the plan to roll out in-store events—such as Fashion Week, All About Lingerie, I go Jeans, Ultimate Watch Fair and RBS Expo—to more stores should effectively boost SSSG going forward. Events have proved to draw crowds and boost sales.
At least one new store per quarter: ROBINS has set the schedule for seven new outlet launches from Dec 2011 till 1Q13. Management revealed that another 20 further potential locations are under study. As such, the plan to open at least 4-5 stores a year should be achieved, which would double the number of locations within the next 4-5 years. That implies an outlet CAGR of 15%.