Robinson Department Store

Buying opportunity: long-term prospects intact

The 14% fall in stock price over the last eight sessions provides a buying

opportunity. ROBINS share price fell likely on concerns over possibly weaker

than expected 3Q12 results, but we remain positive towards the expansion of

the department store format upcountry, as it is the only format still underpenetrated.

Key takeaways from Preview Meeting:

At the preview meeting held yesterday, management indicated that SSS growth in

July-August was weak and margin was pressured down by promotional campaigns. On

the positive side, SSS growth picked up more than usual in September and positive

momentum is expected to continue into 4Q12; it is maintaining its full-year SSS

growth target of 8%. While we see the need to trim our forecast by ~10% for 2012F on

the 3Q12 earnings glitch our TP will fall by only 3%.

SSS growth for 3Q12 was weaker than 1H12 at 8.3% due to: 1) promotional

campaign at Siam before closure for renovation hurt Bangkok stores sales in the

period, 2) weaker spending sentiment plus renovation at two branches upcountry

and 3) high base last year when 3Q11 SSS growth was 16%

Gross profit margin was weaker than 1H12 at 24.8% due to more promotional

campaigns, fewer launches of new products and lower supplier rebates.

SG&A expense was under control, though pre-opening expenses were booked for

three new stores that are scheduled to be opened in Oct-Nov.

Of its two associates, Power Buy and Super Sports, Super Sports sales continued to

show strong growth while Power Buy was hampered by fewer new products to

lure in buyers and overall weaker demand in this product segment

Our estimates show 3Q12F core profit of Bt406mn, 11% lower than our earlier

preliminary estimates, hence we will need to trim down our full-year forecast by

11%, but will do so only after results are released in early November.

SSS growth already picked up significantly in September and ROBINS is on track

with its plan to open three new stores in 4Q12 and we thus expect profit for this

high season to be outstanding – with a good chance of achieving a new high for

profit.