Big C Supercenter

Big C Supercenter Plc (BIGC)

Q2 2013 profit not impressive, rising only 13%yoy and 12%qoq
BIGC’s profit in 2Q13 was not impressive as expected, standing at B1,569m or
the growth of 12%qoq and 13%yoy. Total sales shifted 8.1%yoy (same-storesales
growth was able to meet the target at 3%yoy), while rental income grew
12%yoy from the company’s strategy of increasing rental spaces in existing
and new stores. Profitability has been suppressed by increasingly fierce
competition and the minimum wage raise; so even though gross margin has
risen from 13.5% in 2Q12 to 14.2% in this quarter, it was offset by selling
and administrative expense that increased continuously at a higher rate than
sales. As a result, SG&A/sales rose to 17.4% from 16.2% in 2Q12
- Competition heats up. Cut 2013-2014 forecast by 7% and 6%
1H13 profit accounts for 43% of FY2013 forecast, while earnings in the rest of
the year would be dull. Same-store-sales might escalate to 4%yoy in 3Q13
from relatively low growth in 3Q12, while total sales would be boosted by high
spending per ticket as a result of BIGC’s higher-than-usual electric appliance
selling promotion added to its usual weekly marketing campaigns in order to
attract customers amidst purchasing power declines. However, these positive
factors would be negated by higher cost, so the profitability might be lower
than expected. Accordingly, we revise up our assumption for the cost by
increasing SG&A/sales to 17.1% from 16.4% (17.5% in 1H13). As a result,
FY2013-2014 profit forecast decreases from previously by 7.2% and 6.7%,
respectively. Under the new forecast, 2013 net profit would increase 4%yoy,
whereas norm profit would increase 14.6%yoy, the lowest growth among
peers.
- No positive factor to make price outperform. Sell
The profit outlook is unimpressive while there is no positive sign to boost the
share price. Moreover, the current share price has been fully valued
comparing to the new fair value of B200 (down from B215). We recommend
SELL.