Robinson Department Store

Robinson Department Store 

What’s new?

Power Buy, in which ROBINS holds 40%, has acquired a 49% stake in NKT New Solution and Technology Development Investment Joint Stock Company (NKT). NKT holds 100% of Nguyen Kim Trading Joint Stock Company (NK Trading), which operates an electronics store chain in Vietnam. NK Trading was established in 2001 and currently has 21 stores across the country.

For the financial year ending March 2014, NK Trading reported sales of 8,438bn Vietnamese Dong (about Bt13bn) and a net profit of 352bn Dong (Bt540m).

Minimal impact on earnings in the short-term

ROBINS has yet to disclose the acquisition value and how Power Buy will finance the acquisition. Its filing to the SET simply states that it has issued a corporate guarantee for 40% of the total loan amount of Bt3,795m to Power Buy (pro rata by percentage holding in Power Buy). Assuming that new loans are used to finance the acquisition and a financing cost range of 4-5%, the equity income that Power Buy receives from NKT during the first year would be roughly squared by the interest expenses. Note that we have yet to factor the acquisition into our model, as the deal size, financing plan and NKT’s growth prospects are still matters of conjecture.

Upgrade to BUY

Although ROBINS’ near-term performance will remain weak, its recent share price fall prompted us to upgrade our rating to BUY, as the current price is far below the firm’s fundamental value. The stock currently trades on an FY15 PER of 24.1x, its lowest level in three years. In our view, now is a good time for long-term investors to start accumulating ROBINS at this bargain price. But for short-term investors we recommend waiting until 2Q15, just before the recovery builds steam.