Robinson Department Store

Robinson Department Store Plc (ROBINS)  

 

- Focus on promoting profitability 

ROBINS revealed its business plans amidst the weak economy. The company has been promoting its profitability to compensate for declining sales after 1Q15 same store sales fell 6.6%yoy. ROBIN plans to increase its leasable space by opening more Lifestyle Centers (self-managing). Three new Lifestyle Centers will be opened in 2015 (plus another one which is in existing format opened in May), and at least six branches will be renovated to attract customers; four existing shopping centers will be renovated into Lifestyle Centers (Rangsit, Jungceylon, Sriracha, and Nakhon Si Thammarat). The company also plans to raise its sales by focusing on products with low competition, e.g. footwear, sport, children, and household equipments, and products with not very high price in order to spend less on marketing and sales promotion (discount) for general products. However, ROBINS plans to open fewer branches, decreasing from five to two new branches in 2015 (one Lifestyle Center and one shopping center), and focus on improving existing branches. ROBINS also plans to reduce cost (like BIGC and HMPRO), decreasing its investment budget from B5bn in 2014 to B4bn in 2015. 

- Profit to grow further throughout 2015 

We are still optimistic about ROBINS. Opening of fewer new branches would decrease FY2016 earnings by only 1% from the forecast, and it would be compensated by improvement in profitability. We maintain our FY2015-2016 earnings forecast (but revise our assumptions on sales and rental income). ROBINS's profit would continue growing for the short term since income from five new branches opened in 2014 would be booked for a full year and four new branches opened in 2015 would start making income, thus boosting rental income by at least 30%yoy this year and making up 40-50% of total profit (given that net margin from rent is 50%). Overall, FY2015 profit is estimated to grow by 17%yoy. 

- Limited downside 

Despite negative sentiment from opening of fewer new branches and declining same store sales growth, its earnings are still likely to rebound thanks to better profitability. The share price is currently low, considerably reflecting negative factors already, and FY2015 P/E ratio of 23x is far lower than the sector's average of 28x and the previous average of 24.5x; we reiterate BUY.