Robinson Department Store

Robinson Department Store Plc (ROBINS)

- Political turmoil presses purchasing power. 4Q13 net profit not to prosper
As a result of the political turmoil, 4Q13 net profit is projected at B520m,
growing 22%qoq thanks to seasonal effect but falling 19%yoy as extraordinary
income from reversal of impairment cost was booked in 4Q12, not in 4Q13.
Excluding extraordinary items, 4Q13 normalized profit is expected to stay flat
yoy. 4Q13 sales volume is projected to grow by only 5%yoy (versus 16%yoy
average growth in 9M13). Same store sales are expected to shrink by 1%yoy
due to weak purchasing power in Bangkok and other provinces. Also, CPN has
been seizing ROBINS’s customers from Chiang Mai branch (14 November) and
Hat Yai branch (14 December). Other factors are as follow: 1) 4Q13 gross
margin is projected at 24.9%, close to 4Q13. 2) Rental income is expected to
grow by 17%yoy, thanks to launching of two branches of Lifestyle Center (with
more rental spaces) in Saraburi (22 November) and Surin (20 December). 3)
4Q13 SG&A/Sales are projected to increase from 4Q12 by 120bp to 24%, as
opening of new branches would raise employee expense and amortization cost.
Share of profit from its associates (Super Sport and Power Buy) is projected to
stay flat at B108m, as Super Sport's sales are expected to be outstanding while
Power Buy's sales are likely to be pressed along with electronic appliance
business.
- FY2014 profit not healthy, especially in 1Q14
FY2014 net profit is projected to grow by 15%yoy (15% lower than consensus;
likely to be revised down), lower than the sector's average net profit growth
forecast of 18%yoy, under the assumption that same store sales grow by 4%yoy
and five branches (four of them are Lifestyle Center) are opened. However,
opening of one branch (Rayong branch in CPN's shopping center) might be
delayed. The forecast might be revised down if the political turmoil continues.
Despite not being ROBINS's direct customers, farmers have not received
payment from rice-pledging scheme (agricultural workforce makes up 40% of
nationwide workforce), so overall purchasing power has been weak.
Furthermore, tourism-oriented branches (outside Bangkok) would be pressed,
especially six branches in the South that used to make large amount of profit
(making up at least 20% of ROBINS's total profit). Moreover, as CPN has been
seizing ROBINS’s customers from Chiang Mai and Hat Yai branches, it would
take a few quarters for ROBINS's business to return to normal. Thus, 1Q14 net
profit is expected to contract. However, thanks to World Cup (from late-2Q14)
and commercial run of digital TV (From April on), share of profit from associates
is likely to grow significantly from 2Q14 on, boosting ROBINS's 2014 net profit.
- Price drops substantially but risk remains. Not advisable to buy for short term
Price has dropped substantially, and FY2014 expected PER is at 22.5x, lower
that the sector's average of 25x. However, ROBINS is likely to be pressed
severely by the political turmoil. As risk remains for the short term, we reiterate
"SELL"