Robinson Department Store

Robinson Department Store Plc (ROBINS)

ROBINS reported a 3Q13 net profit of Bt425m, up 12% YoY but down 5% QoQ. The figure was 4% below both our estimate and the consensus, due mainly to lower-than-expected gross margin.
Results highlights
Sales grew 13% YoY to Bt5.9bn on 5% SSSG and new store openings. The SSSG improvement from 3.7% in 2Q13 was partly due to a clearance sale at the Bangrak store ahead of it closing for a three-month facelift (August-October).
Gross margin was 23.8% in 3Q13, down from 24.9% in 2Q13, due to extra promotional discounts put in place to fight the consumption slowdown and the clearance sale at the Bangrak store. The 20 bps YoY GM expansion was due to the low base set by 3Q12.
The SG&A/sales ratio increased to 24.4% in 3Q13 from 22.9% for the same period in 2012 on wage increases and higher depreciation expenses for new stores.
Equity income from Super Sports shot up 113% YoY to Bt54m, driven by strong sales of branded sporting apparel and shoes. Power Buy also showed a slight improvement with profit growth of 3% YoY and 26% QoQ, thanks to a changed merchandising strategy.
Outlook
We expect the 3Q13 income statement to prove to be the nadir for the year; the numbers should improve in 4Q13 onward.
What’s changed?
Our FY13 earnings forecast declines 1% in order to align with actual 3Q13 results, but our YE14 target price stands unchanged.
Recommendation
The worst should already have passed for ROBINS. We expect a recovery in the 4Q13 numbers. Furthermore, the current valuation is attractive—an FY14 PER of 22.3x, versus a three-year average of 28x. As such, we believe this is a good time to reload positions ahead of robust growth resuming in full force in 1H14. We maintain our BUY rating with a YE14 target price of Bt64.