Robinson Dept Store

Robinson Dept Store Plc (ROBINS)

Investment thesis: Last Friday, we joined the opening ceremony for ROBINS' 26th branch, Robinson Lifestyle Center Suphanburi, and returned fully confident that this format can be the vehicle for market entry to smaller cities and a long-term growth driver. ROBINS is now less dependent on host shopping malls. Its competence at building its own retail centers will help it expand beyond the realms of mall developers, which mostly focus on mid-sized to large cities.
Growth driver format: Robinson Lifestyle Center Suphanburi comprises a two-storey 8,000sq.m Robinson department store and a 15,000sq.m retail plaza, the same model as the successful mall ROBINS launched in Trang—its first store to generate EBIT in its first year of operation. The occupancy rate of rental space on the first day was 97% and should reach 100% within a few months. It is too early to say whether the Suphanburi property will follow the same earnings pattern as Trang, but we think it has scope to outperform the Trang store, as the Suphanburi rental rate is 15% higher than the Trang rate.
Capturing frustrated demand: We like the department store’s merchandise mix and believe it will cater perfectly to the unmet shopping needs of the city. ROBINS allocates lots of space for products such as children’s apparel, toys, household goods, brand-name cosmetics and a variety of jeans—items that are rare in other local department stores and retail shops in Suphanburi. Some first-day shoppers we interviewed said that before Robinson opened they had to drive around 100km to buy these items in Bangkok. Now they drive only 2km from the city center. Moreover, product displays at Robinson are far superior to those of any other department store in the city.
Cheap building costs: We thoroughly checked out the building materials of the store and found that ROBINS uses only simple and inexpensive materials, but employs design techniques to make the store look good. The building cost per square meter, thus, is 25% cheaper than that of CPN's provincial malls, while its average rental rate is around 20% higher than CPN's. As such, the profitability of this store should be much higher than that of a CPN equivalent. Based on our calculation, the department store and plaza together should deliver EBIT in their first year of operation.