Siam Makro

Siam Makro Plc (MAKRO)  

- 2Q15 net profit was Bt1.2bn (Bt0.24/share), +11% YoY but -24% QoQ, in line with our estimates and market consensus. The YoY growth was provided by its active store expansion and wider margin, making up for its slight SSS contraction. The QoQ slip was seasonal. MAKRO announced a 1H15 DPS of Bt0.4, XD on Aug 20 and payment on Sep 4. Its 1H15 profit accounts for 45% of our 2015F forecast (vs. 46% over the past five years), and we maintain our estimates. We like MAKRO for its 2-year EPS growth of 21%, mainly powered by better margin and continued expansion. We maintain BUY and will provide an update after the August 13 analyst meeting.

2Q15 Highlights:

- Sales & service revenue. Revenue was Bt38bn, +9% YoY, growing on the back of store expansion that made up for a slight SSS contraction. 2Q15 SSS growth was  -0.9% YoY (vs +6.3% in 2Q14 and +2.8% in 1Q15), eroded by cannibalization and the reopening of its Phuket competitor Supercheap which was closed last year after a fire. In 2Q15, MAKRO opened three new stores: Fang in Chiang Mai, Nakorn Nayok, and Nakorn In in Nonthaburi. This brought total stores to 83 (cash & carry and small food service stores) at end-2Q15 vs. 68 at end-2Q14 and 77 at end-1Q15 (+22% YoY and +4% QoQ). 

- Gross margin jumped 70bps YoY to 10.5%. This reflects better product mix from more sales to the high-margin food segment and HoReCa customers and the absence of provision expenses on chilled foods recorded in 2Q14.

- SG&A to sales was 6.9%, +40bps YoY, from a rise in expenses tied to its expansion, i.e. costs of opening of new stores, plus new project development expenses.

- Interest expenses jumped to Bt57mn, +61% YoY, on funding obtained for its more active expansion.