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Robinson Department Store

No recovery yet. Likely to revise down earnings forecast

Robinson Department Store Plc (ROBINS)

- 1Q14 profit to fall. Low same store sales for second quarter

We project ROBINS’s 1Q14 net profit at B486m, falling 14% qoq and 12% yoy.

The political turmoil has been threatening purchasing power, probably lowering

1Q14 same store sales from -1.4%yoy to -4%yoy, especially in January and

February which should be a high season. Though PDRC stopped seizing

important areas in March, there was no significant recovery. Despite the opening

of five new branches in 2013, ROBINS’s sales volume is expected to contract for

the first time in many years due to the closing of Ratchada branch in March

2013. Other income, namely rental income, is projected to grow by 20%yoy

thanks to an increase in rental spaces. Gross margin is expected leaping from

1Q13 by 230bps to 25% (there was sales promotion in 1Q13 after the opening

of Ratchada branch). However, SG&A/Sales is expected to hike by 400bps to

24.5%; opening of new branches would raise employee expense and

amortization cost (49% of ROBINS’s SG&A), and some expenses on the opening

of the first branch in Vietnam would be booked.

- No signal for recovery. Likely to revise down earnings forecast

We project that ROBINS has passed its lowest already. Its earnings result is

expected to recover yoy throughout 2014 (effect from closed Ratchada branch is

not booked in 2Q13 earnings result). However, 2Q14 earnings result is likely to

suffer from the economic crunch. Also, CPN has been seizing ROBINS's

customers from Chiang Mai branch and Hat Yai branch since late-2013, likely to

take at least three months to recover (projected to lower ROBINS’s same store

sales by 1-2%). Equity profit from Power Buy is expected to increase, as sales

promotion for digital TV is scheduled to start in April. However, there has been

no conclusion about the sales promotion, and it might be delayed to June or

later. ROBINS’s earnings forecast might be revised down; loss from the two first

branches in Vietnam is not included in our forecast yet, and the information is

still unclear. Management gives some guidance that the opening of the two new

branches is projected to raise ROBINS’s SG&A/Sales from 23.4% 2013 (we

expect FY2014 SG&A/Sales to stay unchanged).

- Possibly at downtrend. Sell for short term

Share price has nearly reached FY2014 fair value (FV@B52). There is no

significant for recovery in near future. We reiterate to sell




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