SIAM MAKRO

SIAM MAKRO Plc (MAKRO)

Q3 2012’s profit shifts only 14%yoy and stays even qoq from flat profitability
Q3 2012’s profit of MAKRO was reported unimpressive at only B760m,
the flat growth from a low season in Q2 2012 and an increase of only
14%yoy due to profitability that stayed even from Q2 2012 and Q3 2011.
In spite of 14.3% yoy sales growth (from same-store-sales growth of
7% yoy and 3 new stores opened in Q4 2011-Q3 2012), gross margin
showed only flat growth from Q3 2011 which could not compensate
rising cost. SG&A/sales hiked from 6.9% in Q3 2011 to 7.2% in this
quarter as a result of the minimum wage raise and larger employee
number from newly opened stores and 2 new stores that are
opening in Q4 2012. However, there would be compensation from
corporate income tax cut to 23%, so net margin in Q3 2012 would
stabilize from Q3 2011 at 2.8%.


Cut 2012-2013’s forecast by 10% and 4%
Net profit in 9M12 accounts for only 64% of FY2012’s forecast as
the flood compensation the company has claimed at B360m in 2012
was booked at only B20m in Q2 2012, still lower than our assumption
of B200m. Meanwhile, norm profit comprises 67% of the forecast,
quite low despite a high season in Q4 2012 and the openings of 2 new
stores in Petchaboon (already opened) and Bangplee (to be opened
on 7 November). At the same time, a fierce competition from
hypermarkets, indirect rivals, especially through a discount coupon
promotion (B80 discount for every purchase of B800) starting 2
weeks ago since the beginning of Q4 2012 will partially impact the
company, particularly for customers with not-so-high spending per
receipt. Consequently, we cut our profit forecast for FY2012 and
2013 respectively by 10% and 4%. Under the new forecast, net
profit in FY2012 and 2013 is B3,386m and B4,137m, up 30% and
22%yoy respectively.


Downgrade to “hold”. Wait for dividend of B1.75, XD on 16 November 2012
The share price has been rising on the news that MAKRO would be
included in MSCI Index in this round until it has limited upside from
the new 2013’s fair value, 28x PER, of B483/share. Accordingly, we
downgrade our recommendation from BUY to HOLD to wait for
dividend of B1.75/share for 9M12 (total dividend is announced at
B5.25 so far). XD date is 16 November. Moreover, MAKRO has
announced an establishment of a subsidiary “VSF” with investment
of B31.7m to run an import and export business in Vietnam. More
details will be given after analyst meeting on 22 November.