Robinson Department Store

Key takeaways from preview meeting

Robinson Department Store

Investment thesis

We maintain our BUY rating on ROBINS with a YE13 target price of Bt76. We believe the stock's high valuation (PERs of 32x for FY13 and 26x for FY14) is justified by its strong 3-year earnings CAGR of 25%, FY13-15. Moreover, ROBINS fits with our discretionary spending theme. Greater consumer spending power (brought about by higher wages and lower personal income tax) may give an extra boost to SSSG and GM, which we would expect to eventually prompt a street forecast upgrade.

4Q12 earnings preview

We anticipate a 4Q12 net profit of Bt525m, up by 71% YoY and 38% QoQ. Stripping out a non-recurring loss of Bt110m in 4Q11 (due to flooding damage at a Power Buy warehouse; ROBINS has a 40percent stake in the firm), core profit would increase by 26% YoY.

SSSG rebounded strongly, as expected

Management guides that reported FY12 SSSG will achieve its target range of 7-8%. Excluding cannibalization between the Ratchada and Rama IX stores, FY12 SSSG would be around 10%. The full-year guidance implies 4Q12 SSSG in the range of 8-10%, in line with our estimate. The strong recovery from only 4.1% in 3Q12 is attributable to the low base set by the 4Q11 flooding, new collection arrivals and strong shopping sentiment during the festive season. For FY13, ROBINS eyes SSSG of 8-9%, slightly above last year, as there won't be a significant cannibalization effect to take into account—the Ratchada store will be shuttered in late March.

Gross margin back on an uptrend

The new collections and good shopping sentiment should enable gross margin to resume fattening. Management guides that the FY12 GM expansion target of 20 bps should be achieved. The implication is that 4Q12 GM increased 45 bps YoY to 25.2%. For FY13, ROBINS targets GM expansion of 20 bps.

Confirmation of plan to roll out at least five stores a year

Although ROBINS has yet to disclose two planned new locations this year, it confirms that it will open five new stores in FY13, one of which will be located in CPN’s shopping mall in Ubon Ratchathani, the remainder will be self-developed in the firm's lifestyle mall format (Kanchanaburi in Feb and Sakon Nakorn in July). From FY14 onward, the number of new stores to open annually is very likely to exceed five. The extra dividend of Bt1.39bn received from Power Buy and Super Sports should strengthen the company’s resolve to move ahead even more aggressively with its expansion plans.