Robinson Department Store

Robinson Department Store (ROBINS)
- Consumption low, 2Q13 profit projected to grow only 10% yoy
We project ROBINS’s profit in 3Q13 to be the lowest of the year as a result of a
rainy season and decelerating purchasing power since 2Q13. The profit is
estimated at B433m, shrinking 3%qoq but still growing 14%yoy as sales have
increased 12%yoy from aggressive marketing campaign during the quarter and
a big promotion of Robinson Bangrak before its shutdown for renovation that
boosted same-store-sales growth to 4%yoy. However, the promotion would
suppress profitability in 3Q13. Although gross margin is projected to shift from
23.6% in 3Q12 to 23.9% (which is still insignificant since the profit base in 3Q12
was low because of a clearance sales promotion to reduce excess inventory after
the flood), it would be offset by higher selling and administrative expense from
wage, new store opening, and marketing expenses. Accordingly, SG&A/sales
would increase from 22.9% in 3Q12 to 24%, while share of profit from its
associates - Super Sport and Power Buy (20% of total profit) would increase
B15m from 3Q12 to B75m in this quarter (yoy) but stay flat from the previous
quarter (qoq).
- Likely to cut forecast after 3Q13 earnings report despite high season in 4Q13
The last quarter of the year is usually a spending and festive season. In addition,
the company has planned to open two new stores in Saraburi (November) and
Surin (December), while the Bangrak store will be reopened in December.
Furthermore, share of profit from associates would peak during the high season.
Consequently, the company’s profit likely makes the year’s high in 4Q13.
However, the profit might not be as outstanding as in the past several years due
to customers’ wear purchasing power. Moreover, CPN is going to open two new
Central Department Stores, one in Chiang Mai (14 November) and the other one
in Hat Yai (14 December), which might affect ROBINS’s sales in the two
provinces (profit from Robinson Hat Yai and Chiang Mai accounts for 12% of
total profit). Accordingly, 9M13 profit is projected to comprise 65% of FY2013
forecast, so we might revise down our forecast after 3Q13 earnings
announcement.
- Upside begins to show but still not attractive. Hold
The share price begins to show upside again, but as we are likely to cut our
FY2013-2014 forecast, FY2013 fair value might decrease to stand close to the
current share price. Even though we are using FY2014 fair value after 3Q13
earnings are declared, the upside is still limited. Reiterate HOLD.