Big C Supercenter

Big C Supercenter Plc (BIGC)

- Surprisingly high 4Q13 profit due to high gross margin
4Q13 net profit made the new high at B2.64bn, rising 92%qoq
and 41%yoy (36% beyond our expectation, 43% above
consensus). Gross margin improved significantly by 3%yoy to
18.3%, higher than 9M13 average of 13.8%. Aside from usually
high supplier rebate in 4Q, BIGC also benefited from other
subsidies, similar to 3Q13. Other factors were as expected: 1)
4Q13 sales volume stayed flat yoy as a result of the political
turmoil. Thus, same store sales contracted by 4.7%yoy. 2)
Rental income and other income grew by 10%yoy thanks to an
increase in rental space and income from advertising space. 3)
SG&A/Sales stayed at 17.3%, close to 9M13.
- Weak growth due to negative factors
Though FY2013 net profit was 12% higher than our forecast, we
maintain our forecast. However, we might revise it after the
analyst meeting on 13 February, as we are not sure whether
BIGC's profitability would stay high and how many new branches
BIGC plans to open in 2014. Preliminarily, it would be hard for
BIGC to keep its profitability high, as fierce competition has
been forcing BIGC to give discount to promote sales every week
and purchasing power has been pressed by the political turmoil.
Thus, FY2014 profit would not grow significantly, especially in
1Q14.
- Price to rise. Good time to sell
BIGC's return is -3%, close to the market's return
(underperforming). However, 4Q13 earnings result was much
better than expected, so share price might rise for a short term.
This is a good time to sell. BIGC's FY2013 dividend is B2.55
(1.4% dividend yield), will be paid on 5 March 2014.