New sales law would hit

The Internal Trade Department said recently it would consider amending the retail-wholesale business bill to encourage fair competition by separating store types and the product types each kind of store can carry.

SCRI's report focused on listed retailers and wholesalers. Siam Makro runs a wholesale business called Makro, and Big C manages discount stores under its own name. Both Makro and Big C also sell products at retail prices in their stores.

The ministry's measure aims to create a level playing field for all retailers and wholesalers, so other retail giants such as Tesco and Carrefour would also be restricted by the amended law.

However, many market-watchers doubt that the proposed legal revision will be delivered, as traditional retail stores, which lawmakers want to protect, would not benefit as much as expected from the act if it were amended in this regard. Those to benefit the most would be suppliers.

Aungkana Tungwikromkrai, an analyst at KGI, said yesterday that there would be many loopholes in the law if the change were really effected.

If the law is left alone, retail stocks like CP All, Makro and Big C will make good defensive choices, as they are relatively immune to the US financial crisis and political turmoil, she said.

However, SCRI pointed that if the act were amended, the stock which would be comparatively unscathed was CP All, because its 7-Eleven convenience stores have small formats and sell items above market prices.

Kim Eng Securities (Thailand)'s Kelive Research recommended a trading buy for CP All, reflecting its strong performance, mainly driven by higher sales at its domestic 7-Elevens and a recovery at its Lotus retail stores in China.

The brokerage also revised its forecast for CP All's 2008 normalised profit by 43 per cent to Bt2.18 billion, up 65 per cent on year.

It said 7-Elevens still had plenty of room for growth. Thailand ranks fourth in the world with the most 7-Elevens at 4,600 units, following Japan, the US and Taiwan.

Kelive Research expects that sales at Lotus in China will finish up by the end of this year, resulting in the increase of its estimate for CP All's 2009 net profit to grow by 53 per cent to Bt3.34 billion.

However, Siam Makro has been picked by Asia Plus Securities' research unit as an "investing buy".

With a better-than-expected net profit in the second quarter, Siam Makro still has potential for growth as well as high dividends.

Siam Makro's second-quarter net profit was up 53 per cent on year to Bt432 million, boosted by the disposal of its investment in wholly owned subsidiary Makro Office Centre for Bt169 million.

Big C was picked as a good defensive play by KGI Securities (Thailand).

The brokerage said the positive return for merchandisers had been seen across the board, especially in the retail sector in the month starting on September 5.

"The one-month return for the retail sector outperformed the SET and other sectors, affirming its defensive properties, as most of its revenues are derived from daily food. Therefore it saw little impact even with the volatility," it stated in its note.