Big C Supercenter
Play
Plan for new branch opening in 2013 gets clearer. Upgrade to "HOLD" HOLD
Current price (B) 193.00
Fair Value (B) 215.00
Market cap (B bn) 159.22
- 3Q12 profit hits year’s record low, increasing 27% YoY
but dropping 26% QoQ due to seasonal effects
- The rest of 2012 in high season while 2013 full with
aggressive branch expansion
- 2013 fair value is B215. Upgrade recommendation from
“SELL” to “HOLD”
- 3Q12 profit hits year’s record low, increasing 27% YoY CGR
but dropping 26% QoQ due to seasonal effects
BIGC’s 3Q12 profit stands at B1,033m which is the year’s record low,
decreasing by 26% as a result of the rainy season; however, it has increased
by 27% QoQ due partly to the recognition of flood insurance at around
B146m. If the mentioned recognition isn’t included, the norm profit would be
only 9.4% growth due to the deceleration of benefits from merging with
Carrefour (Synergy) of which the sales have grown by 7.9% YoY (while
same-store sales have grown only by 3.7%) and the increase of rental-fee
revenue at 10.5% YoY. For the gross margin and EBIT margin, they have
only stabilized from 3Q12 by 13.6% and 5.6% respectively as a result from
aggressive competition and the minimum wage policy. Nevertheless, this is
partially compensated by the decreased interest expense from B405m in
3Q12 to B330m due to refinancing debt of Carrefour at around B36.5bn (by
partially repaying principle) and lower interest rate of new loan.
-The rest of 2012 in high season while 2013 full with
aggressive branch expansion
The company’s 9M12 net profit is considered 71% of our forecast, as the
tendency of profit in 4Q12 might leap from 3Q12 due to high season.
However, if compared with one in 4Q11 at B2.4bn, the net profit is projected
to decrease because, in 4Q11, there has been the recognition of
extraordinary revenue at around B750m (deferred tax liability, tax exception
from political situation and insurance compensation). We maintain our 2012
profit forecast at B5,913m or 13% YoY increase. For 2013 outlook, the
management has recently revealed the plan of new branch expansion in 2013
that includes 7 branches of Hypermarkets, 14-20 branches of Big C markets
and 75-150 branches of Mini Big C. This plan is under the CAPEX investment
budget of B7-8bn and the number of branches is slightly higher than our
projection at 5, 10, 150 branches respectively. Nevertheless, due to the
competition that is still constantly aggressive and the competitor like Tesco
Lotus that has accelerated on the branch expansion which is close to BIGC
under the CAPEX at B6bn in 2013, we’re convinced that these would still be
the pressure upon the company’s profitability, gross margin and EBIT margin
(as seen before in the previous 2 quarters). In 2013, there is projected not to
be revenue from flood compensation like 2012. Accordingly, we maintain our
2013 profit forecast at B6,834m or an increase of 15.6% YoY.
- 2013 fair value is B215. Upgrade recommendation from
“SELL” to “HOLD”
Although the recent plan of new branch expansion is still far behind the
target in the next 4 years at 300 branches (only Hyper Markets and Big C
Markets) from the current 130 branches, it’s considered a positive signal and
is obvious that there would be more branches openings next year, as many
more to come in the following years. Combined with our revisal to use 2013
fair value at B215/share with 11% upside, we upgrade our recommendation
from “SELL” to “HOLD”
