FRIDAY, March 29, 2024
nationthailand

Robinson Department Store

Robinson Department Store

Promising growth underwriting outperformance BUY

Robinson Department Store Plc (ROBINS)

ROBINS share has outperformed its sector for the past three months in response to its outstanding 2Q16 growth (+38% YoY vs. +28% YoY for the sector). This will continue into 3Q16F, backed by positive SSS growth as consumer sentiment brightens plus layout revamps, higher margin from private brands and more equity income. ROBINS is trading at 1.5x 2-year PEG (below the sector’s 1.8x). BUY with mid-2017 DCF PT of Bt80. 
 
Improving SSS in July. In July, ROBINS’s SSS growth improved to close to mid-single digit, better than the flat YoY in 2Q16 (or +2% YoY, if excluding 2Q15’s high base from the Sri Racha clearance sale) and -4% YoY in 3Q15. Behind this is: 1) better consumer sentiment and long holidays; 2) store layout adjustment that includes adding high-potential products (i.e. health & beauty, luggage, denim, lingerie, kids, home, and shoes), more international private brands (i.e. Claire’s, Babyshop, Payless, Yves Rocher and Aeropostale) and more private brands (i.e. Just Buy). SSS growth at upcountry stores (70% of sales), notably in the central and northeast, outshone Bangkok.  Targets positive SSS in 2016F. ROBINS is working to bring its SSS growth up to Thai GDP growth, which is projected at 3% in 2016F (vs. 1.3% in 1H16). The thrust will come from displays of more high-potential products made possible by store layout adjustment and international and private brands to reach 12% at end-2016 (from 10% at end-1H16 and 8% at end-3015). It will expand international and private brand booths to 120 stores by end-2016 (98 at end-1H16 and 80 at end-2015). 
 
Moderate expansion maintained. This year ROBINS opened a new department store in Nakorn Sri Thammarat in July and in December will open a new lifestyle center in Lopburi, giving it 46 stores at end-2016. It plans to complete major renovations at three stores within 3Q16F: Rama 9, Ratchaburi, and Chantaburi. The revamp is aimed at cutting back on dead space and raise rental area and sales per store to high single-digit growth. It still plans to open three new stores in 2017F, with land already secured, primarily focused on the central region. 
 
Better gross margin. ROBINS maintains its goal of expanding gross margin by 50bps YoY to 25% in 2016F (vs. +50bps in 1H16) via raising the portion of high-margin private brands to sales, better product mix with more “everyday great value” products (no need for special sales price), and better management of marketing campaigns. Its gross margin for international and private brands is at least 35-40%, vs. 24% for conventional products. This means each 1% rise in international and private brands to sales raises gross margin by 11-16bps. 
 
Growing rental and equity income. ROBINS maintains its targeted rental income growth of 16% in 2016F (vs. +16% YoY in 1H16) as it adds more rental space in its new lifestyle centers and raises rents. In 3Q16, it should enjoy continued outstanding equity income growth from both SuperSport and PowerBuy (+45% YoY in 2Q16) on better sentiment brought by global sporting events (UEFA Euro and Olympics) in Jul-Aug 2016 and off 3Q15’s low base for PowerBuy. 
 
 

 

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