Berli Jucker
Strong 4Q15 earnings as expected HOLD
Berli Jucker Plc (BJC)
In line with estimate
BJC reported 4Q15 net profit of Bt693m, up 23% YoY, in line with estimates. The strong results were driven by better performance at all core businesses, particularly its Consumer Supply Chain.
Results highlights
Packaging Supply Chain sales were Bt4.86bn, up 6.8% YoY on the back of a 7.5% increase in sales of glass bottles and 6% increase in aluminum can sales. Gross margin improved from 17.4% in 4Q14 to 19.3% in 4Q15 thanks to lower raw material and energy costs. However, the chain’s profit rose only 5% YoY to Bt430m due to the unplanned shutdown of its glass bottle factory in Malaysia.
Consumer Supply Chain sales rose 3.6% YoY to Bt4.05bn in 4Q15. Food sales dipped 2.5% YoY, while non-food sales fell 5.4% YoY. Overseas revenue rose 23.2% YoY on greater demand in Vietnam. Operating expenses fell a substantial 40% YoY to Bt381m as the company cut marketing expenses. As such, profit soared 502% YoY to Bt119m.
Healthcare & Technical Supply Chain sales advanced 5% YoY to Bt2.17bn thanks to improved sales by its Pharmaceutical and Medical divisions following an increase in government budget. Gross margin was 33%, relatively flat YoY and the chain’s profit increased 8.8% to Bt224m.
Outlook
We expect 1Q16 earnings to grow in the range of 5-10% YoY. From 2Q16 onwards, its bottom line will depend largely on BIGC’s earnings and its financing costs for the acquisition.
What’s changed?
Our forecast and target price remain unchanged. Note that we will factor in BIGC in our BJC model after the deal and financing plan are completed.
Recommendation
The 10% share price rise since our rating upgrade following the acquisition of BIGC has removed upside to our YE16 target price. We are still positive on the deal and think that the acquisition will enhance BJC’s value in the long run, but at this share price, we prefer to wait until we have a clearer picture about how BJC structures its financing options and the benefit it takes from controlling BIGC. We move our rating to HOLD from BUY.
