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CP ALL

CP ALL Plc (CPALL)

Q3 2012 profit grows impressively, rising 34% YoY due to stamp promotion

Although it's the rainy season in 3Q12, the benefits from launching stamp promotion in 3Q12 instead of the 4th quarter has brought about outcome beyond expectation, urging 3Q12 profit to thrive vigorously to B2,902m or 12% QoQ and 34% YoY increase. This is a result of the sales that have leaped by 21% YoY, as the same-store sales have grown to the record high by 16% YoY while the sales from new 567 branches have grown by 5percent since 4Q11-3Q12. For the gross margin, it has risen from 25.3% to 25.8% despite slightly decreased sales of food and beverage from 73.5% in 3Q11 to 72.8% due to lots of non-food products that are included in the stamp promotion. Moreover, CPALL has benefited from revenue from sales promotion of suppliers that has increased by 59% YoY and the corporate income tax that is cut to 23%. Nevertheless, this

is partially offset by SG&A/sales ratio that has ascended from 22.3% in 3Q11 to 23.9% due to the abovementioned promotion.

Maintain 2012 profit forecast, constantly hitting new high at B10,748m or 34% YoY growth

Though 9M12 net profit is considered 77% of 2012 profit forecast and 4Q12 is the high season of customers' spending, SG&A in 4Q12 is projected to hit record high due to the common revisal of

expenses. Combined with the stamp promotion for 2 more months (25 July 2012 - November), the selling expense would be constantly high and might bring about slight weakness for 4Q12 profit

compared with one in 3Q12. Accordingly, FY2012 profit would be raised only by 3-4% beyond our projection. Therefore, we maintain our 2012 profit forecast at B10,748 or 34% YoY increase, still

tending to grow continually by 19% in 2013.

2013 fair value, using 30x PER, stands at B43

Although the competition of convenience stores tends to get more aggressive from now on, CPALL has been the leader with 50% of the market share of the total convenience stores, especially in Bangkok and the surrounding areas where located 3,160 branches. Accordingly, we're still not concerned by the mentioned issue, believing that only some branches would be affected. However, we reiterate our recommendation of only "HOLD" due to the current share price that has increased to result in limited upside from 2013 fair value based on 30x PER (FV@B43).




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