Robinson Dept Store
Excellent profit BUY (upgraded) Target Price: Bt62.00 Price (10/05/12): Bt55.00
Robinson Dept Store Plc (ROBINS)
Beat estimate: ROBINS reported a 1Q12 net profit of Bt564m, up by 46% YoY and 84% QoQ. The result was 21% higher than our estimate and 17% above the consensus, due mainly to higher-than-expected SSSG, gross margin and equity income from PowerBuy and SuperSports.
Results highlights: Revenue increased 24% YoY to Bt5.07bn in 1Q12, driven by 8.8% SSSG (our estimate was only 6.5%) and four new malls that have opened during the last 12 months. Provincial stores remained the growth drivers, posting double-digit SSSG.
Gross margin expanded 74 bps YoY to 24.8%, much more than management’s recent guidance for a 30 bps increase. ROBINS claimed that the fat margin for the quarter was mainly due to strong shopping sentiment, so the company didn’t have to offer price discounts to encourage customers to spend.
PowerBuy and SuperSports together contributed equity income of Bt125m for 1Q12, up an impressive 95% YoY (far above the management guidance range of a 30-40% YoY increase), underpinned by PowerBuy Expo and a demand surge related to post-flooding home improvements.
Outlook: We expect core profit to soften slightly QoQ in 2Q12 on seasonality and higher payroll expenses. However, ROBINS might book insurance payouts for 4Q11 flood damage in 2Q12, which would top up the bottom-line for the quarter.
What’s changed? After talking with management, we believe the fat gross margin reported for 1Q12 will be sustained through the year, while equity income is also likely to rise further in 2Q-3Q12, boosted by mega sport events (EURO 2012 soccer and the Olympics). As such, we have upgraded our FY12-13 earnings forecasts by 8% and 7%, respectively, and raised our YE12 target price to Bt62 from Bt50.50.
Recommendation: The stronger gross margin has eased our concerns about that profit growth might decelerate in FY12-13. Based on this better margin trend—even factoring in the losses chalked up by new stores (which should peak in FY13)—ROBINS’ profit growth profile remains strong. As such, we have upgraded our rating to BUY from HOLD.
