Big C Supercenter

Competition still pressures profitability. Only Recommend "HOLD"

Big C Supercenter Plc (BIGC)

Q4 2012 profit moderate, rising 82% QoQ but dropping 22% YoY

BIGC's 4Q12 profit has peaked to B1,876m or 82% QoQ increase due to seasonal

benefits; however, it has decreased by 22% YoY because of B750m of

extraordinary income (tax adjustment and insurance compensation for the flood

crisis and fire accident) that had been recognized in 4Q11. If the mentioned item is

excluded, the norm profit still has increased by 13.4% YoY because 4Q12 sales

have enlarged outstandingly to hit B30bn for the 1st time or 18% YoY increase due

to aggressive marketing, especially from the discount coupon (B80 discount for

B800 buy). Customers' attention has been urged and sales have increased

noticeably, reflecting from same-store sales that have risen to 12.1% YoY.

Moreover, the company's plan of branch expansion in 2012 has been accomplished:

5 branches of Hypermarkets (more than target by 1 branch), 6 branches of Big C

markets, 75 branches of Mini Big C and 41 branches of Pure pharmacy stores. For

the profitability, it is still similar to the last 2 quarters which is not outstanding, but

only stabilizing from 4Q11 with 6.1% norm margin as a result of aggressive

competition. BIGC's FY2012 profit is B6,074m, increasing by 16% YoY which is

close to our forecast.

Aggressive competition still pressures profitability. 2013 growth target maintained at 13%

From the analyst meeting on 18 February 2013, BIGC has revealed a sure plan to

expand 6 branches of Hypermarkets , 13 branches of Big C markets, 150 branches

of Mini Big C and 50 branches of Pure pharmacy stores (these are close to our

projection). Other than that, the company would invest in 1 more distribution

center with the total 2013's CAPEX of B8.4bn which could still be obtained from

cash flow projected to be enough. Furthermore, the revenue in 2013 is targeted at

9-10% YoY increase which is close to our assumption. Nevertheless, the

profitability is projected not to be so outstanding and would only stabilize due

mainly to aggressive competition which is in line with the company's target that

maintains the EBITDA margin at the same level of that of 2012. Keeping an eye on

BIGC's promotions since the beginning of 2013 until present, we've found that the

competition is still constantly aggressive and the company is still on the move with

marketing, especially discount coupons (for instance, B80 discount for buying

B800). Although this has apparently boosted sales like in 4Q12, the profitability is

affected. At present, there have been 4 times of discount coupon giving (details on

following page) like competitors, so this kind of promotion is projected to be

arranged continuously especially during festivals, thus still pressuring profitability.

Accordingly, we maintain our 2013 profit forecast at B6,834m or 13% YoY increase.

No positive signal emerges. Recommend "HOLD" to receive div yield, projected in March at B2.2 or 1%

The share price has declined for consecutive 3 quarters after the financial result has

been reported lower than expected by Consensus. Unlikely to revise up forecast, we

only recommend "HOLD" (FV@B215). BIGC's dividend yield is projected to be

announced around this March at B2.2, considered 1% div yield.