Jay Mart

Jay Mart Plc (JMART)

Ready to grow. JMART did well at the Thailand Mobile Expo 2013 held 23-26 May and
spring-boarding off this, plans to arrange 60 of its own events in 2013 in Bangkok and
provinces, up from 40 in 2012. Of these, eight will be large events, six of which will be in
Bangkok and two upcountry. It targets same-store sales growth of at least 8% and
plans to open 60 new branches to bring its total to 280 in 2013. JMART’s growth path is
expected to follow that of modern trade’s.
Enjoying success of smartphone sales. Sales of smartphones – especially Samsung
– are doing extremely well. Samsung has models that address every segment of
mobile phone users and now has a market share of over 50% in Thailand, well over its
30% share globally. Pushing it locally is its reasonable price tag. JMART has developed
its own brand, “Jphone”, and plans to launch a greater variety of its branded products
in 2H13, all priced below Bt10,000. Gross margin on its own brand is 30%, double the
margin of international brands of 12-15%.
Expanding to AEC. JMART is setting up four shops in Myanmar and targets 20 shops
this year, through a joint venture between JMART (60%), and a local partner, MK Group
(40%). Currently, Myanmar has a population equal to Thailand but still has only 3.8mn
mobile phone numbers. Its government hopes this to grow to reach 30mn by 2016.
JMART has chosen Myanmar as its first foray abroad, seeing it as underpenetrated
compared to Vietnam and Cambodia, where competition in the mobile phone industry
is much higher. Profit contribution will be significant in one or two years.
JMT and JAS Asset contributed 12% and 5% gross profit in 1Q13. JMT reported a
50% gross margin with JAS Asset reporting 17% gross margin, both better than
JMART’s 13%. JMT plans to bid for Bt10bn in new bad debt but will reduce the
weighting of automotive loans, seeing gross margin as too low because of the stiffer
competition
Valuation and recommendation. We BUY JMART with a target price of Bt34/share
based on DCF valuation. JMART is poised to experience a great year as users switch to
smartphones in increasingly greater numbers. We estimate 2013 sales growth of 39%
YoY to reach Bt10bn, with core profit growing 59% YoY to Bt485mn.