Robinson Department Store
Still expensive. Unattractive for short-term investment SELL
Robinson Department Store Plc (ROBINS)
- Market in Vietnam to boost profit in long run
At the May 14 company meeting, the new CEO, Alan Thomson (former Central
Group's manager) revealed the plan to expand the business in Vietnam in
addition of the usual plan of opening five branches a year mainly in Thailand.
The first Vietnam branch opened in March has received good feedback. Though
purchasing power has been weak due to lower popularity of fashion, spending
per ticket is as high as non-major provinces in Thailand (estimated
B800/ticket), and ROBINS can focus more on inexpensive products e.g. housebrand
products. Moreover, thanks to less fierce competition and lower
operating cost compared to Thailand, gross margin in Vietnam is slightly
higher than in Thailand.
- Revise down earnings by 6% in 2014, 9% in 2015
Though, we have a positive outlook on expanding the business in Vietnam, we
expect that it would face loss for a short term. Also, profit from business in
Thailand has dropped slightly as a result of the weak economy. Therefore, we
revise down ROBINS's earnings forecast by 6% in 2014 and 9% in 2015. After
the opening of the new branch in Vietnam, selling and administrative cost
might exceed the previous forecast at 23.4% (24.4% in 1Q14) and increase
further in 2H14 as a result of the opening of new branches (five in Thailand,
one in Vietnam). However, gross margin and rental income would be higher
than preliminarily expected. Under the new forecast, FY2014 net profit is
expected to grow by 6%yoy (4% below consensus).
- Still expensive. Sell for short-term investment
ROBINS's valuation is close to sector's average; the sector's FY2014 average
expected P/E ratio is 26x. New FY2014 fair value (DCF, 9.5% WACC, 2.3% TV
growth) of B48 is still expensive. We reiterate to sell ROBINS(FV@B48).
