Robinson Department Store

Robinson Department Store Plc (ROBINS) 

 

ROBINS's profit was better than expected in 4Q14, likely to rebound further in 2015 thanks to high rental income and rising sales revenue. The share price is currently attractive, with less expensive valuation than the sector's average and the previous average. 

- 4Q14 profit better than expected thanks to high rental income   

 

ROBINS's 4Q14 profit was B595m, growing 69%qoq and 6%yoy (22% higher than expected and 28% above consensus).  

 

Rental income rose far beyond projection by 58%yoy (37%yoy up in 9M14) thanks to the opening of five new branches, mostly Lifestyle Centers with more leasable spaces. Meanwhile, other figures were in line with our projection. Sales revenue fell as a result of weaker purchasing power, same store sales dropped 6%yoy, lowering gross margin by 30bps from 4Q13 to 24.7% in 2014, and share of profit from associates (Supersports and Power Buy) decreased from B114m in 4Q13 to B96m in 4Q14 as a result of the weak economy. Overall, ROBINS's FY2014 earnings were in line with our forecast. 

 

- Profit to rebound in 2015   

 

ROBINS's profit is expected to rebound by 17% in 2015 (5% below consensus). 

 

Rental income (25% of total profit) is expected to grow at least 30% (45%yoy up in 2014), close to the company's target, since profit from the five new branches opened in 2014 will be recognized for a full year and four new branches (three Lifestyle Centers) will be opened this year. 

 

Sales revenue would rebound by 12% from the low base in 2014 (due to the weak economy), slower than rental income. 

 

Normalized margin is expected to improve from 2014 since high-margin rental income would increase and make up more of ROBINS's earnings and gross margin from sales is projected to rise from 2Q15 on; but 1Q15 gross margin is expected to drop as a result of the closing-out clearance sale at Robinson Ladya. Overall, ROBINS's earnings are projected to grow yoy from 2Q15 on compared with the weak profit and sales base in 2013. 

 

- Good entry point. Inexpensive   

 

The share price is currently attractive. P/E ratio in 2015 is 22x, lower than the seven-year average of 24x and the sector’s average of 27x. We recommend BUY; it is very advisable to hold ROBINS for longer than six months. ROBINS is a good choice, likely to outperform the SET when the economy is about to rebound because it is usually affected by the economic change more than peers. FY2014 dividend is B0.9, or 2% dividend yield; XD date is March 6, and dividend will be paid on May 7.