Robinson Dept Store

Robinson Dept Store Plc (ROBINS)

Investment thesis: We have upgraded our YE12 target price to Bt50.50 from Bt44, as we have raised our yearly number-of-new-stores-rolled-out assumption to five from four and lengthened our assumed timeframe for this aggressive expansion phase to 2016 from 2015—assuming no new outlets after 2016. We think the high FY12 PER of 24.5x is justified, given FY12 EPS growth of 25.7% and a 3-year CAGR of 25.2%. We also see scope for upside to our earnings projections from stronger performances by new stores than modeled, particularly at Rama IX.
4Q11 is behind us: We expect ROBINS to post a 4Q11 net profit of Bt395m, down 5% YoY but up 6% QoQ. The weaker YoY performance is due to high marketing and advertising expenses for the opening of the new flagship Rama IX store, extra expenses related to the flooding and weak sales at Power Buy and Super Sports during the inundation—we estimate equity income from Power Buy and Super Sports at only Bt70m, down by 28% YoY and 20% QoQ. We assume SSSG of 6% for 4Q11, then 8% in 1Q12.
To double store numbers in five years: Five new stores a year should be ROBINS’ new roll-out norm in order to cater to rapidly rising demand upcountry, brought about by lifestyle changes and urbanization in the provinces. Apart from the five outlets to open this year and three secured locations for 2013, management is looking at another 20 potential sites, which should sustain the plan to open five new stores annually for at least the next five years. CAPEX is set at Bt3.0-3.5bn per year, all of which will be internally financed. In our view, 100 stores (four-fold from now) nationwide is an achievable long-term goal.
Strong new outlet performances: ROBINS said that all the new locations opened since 2010 have performed ahead of expectations. Previously, a new store would take 3-4 years to break even, but the payback periods for the new outlets look set to prove shorter. For example, the Trang store, which opened in 4Q10, started contributing profits in its first full operational year, while three outlets that opened in 2011 may take only two years to break even. We think the shorter payback period results from improved know-how and synergy-building within CRC group. As such, the mid-term numbers should exceed our earlier model.