Home Product Center

Home Product Center Plc (HMPRO)

Up expansion target to 10 branches. 3 Mega Homes opening as planned
According to the analyst meeting, HMPRO has revised up its expansion target of
HMPRO branches in 2013 from 7-9 to 10. Two of them have already been opened
(in Chantaburi and Chumporn), while the rest will be subsequently opened this
year (Prachinburi and Surat Thani (relocation) in June and other 6 branches in
other provinces and another 1 in Bangkok in 2H13; all these branches have
already got licenses and certain locations). At the same time, Mega Home, a
subsidiary established for operating modern trade business that focuses on clients
who are contractors, will start a service of 3 branches in 4Q13, which includes
Navanakorn (25,000 sqm), Tak (Maesod), and Nong Kai (15,000 sqm). At the
same time, HMPRO has maintained its plan to open 2 branches in Malaysia in
2014 (one in late 1Q14 and another in 4Q14). Same-store-sales growth is
targeted at 6%yoy, despite a decrease of 1.7%yoy in 1Q13 as a result of the high
profit in 1Q12 due to benefits after the flooding.
Profit already bottoms out. To shine again since Q2 2013
We believe same-store-sales in 2013 would thrive 6% as the company has
targeted. Same-store-sales growth in 2Q13 is estimated at 10%yoy due to the
low same-store-sales growth of only 2.7% in 2Q12. At the same time, a problem
of cannibalization between the Mega Bangna and Suvarnabhumi branches and the
Hat Yai and Karnchanavanich branches will relieve substantially, in line with
same-store-sales in April 2013 the company has disclosed. With all the positive
factors, we preliminarily project 2Q13’s profit growth at 30%yoy and 21%qoq.
However, the company’s expenses might increase in 2H13 from staff expense and
preopening cost from the target to open 10 new branches, which is more than our
assumption for only 8 branches. As most of the new branches will be opened in
the last quarter of the year, the company might not be able to book income from
these branches while the expenses have risen. In addition, in 2014, there will be
an effect from openings of 3 branches of Mega Home, which are projected to face
loss in the first 1-2 years of their operations and need some time to create
customer base against the competitors, Thai Watsadu and Global, which have
branches in Tak and Nong Kai, respectively. Furthermore, an establishment of a
property fund might not be done this year, so the company would not be able to
book the extraordinary profit by 4Q13. We would revise down our forecast again
after 2Q13.
- Long-term growth still in uptrend. Reiterate “Buy” ([email protected])
We are likely to cut our profit forecast for 2013-2014; but with a positive outlook
toward the aggressive business plan of HMPRO, which is projected to show
significant growth since 2015 onward, we reiterate our BUY recommendation. Fair
value, using DCF (WACC of 9.2%, TV growth of 4%) is B16.9, which implies 13%
upside. However, in the short term, we recommend switching to CPALL.