Industry Update
Tuesday, May 19, 2015
Retail
COMMERCE
Rec : NEUTRAL
Good entry point
The sector's profit rebounded earlier than expected in 1Q15 since improvement in
profitability compensated for declining sales caused by the weak economy, likely to
continue growing for the remainder of the year. This is a good entry point. Top picks
are CPALL and ROBINS.
 1Q15 profit grows 18.2%yoy
Seven retailers under our study posted total 1Q15 profit of B8.3bn,
dropping 5%qoq due to low season but rebounding significantly for the first
time in many quarters by 18.2%yoy (earlier than expected). Although same
store sales have stayed flat for many quarters as a result of the weak
economy, total sales grew by 9%yoy owing to aggressive branch expansion
in 2014. Profitability also improved. Normalized profit margin increased for
the first time in many quarters by 300bp from the weak base in 1Q14 to
4.3% owing to lower expense and better cost-efficiency (BIGC), higher
rental income (ROBINS), increase in proportion of high-margin goods
(MAKRO and CPALL), and lower financial cost (CPALL). BEAUTY and CPALL'
earnings grew most significantly by 45%yoy and 26%yoy, respectively.
Sector Index : 28,358.79
SET Index : 1,510.41
 Growing throughout 2015
The commerce sector's profitability is anticipated to grow for the remainder
of the years. CPALL and MAKRO (59% of total profit) are likely to make the
strongest profit growth among peers since the proportion of high-margin
goods would increase and financial cost would stay unchanged, promoting
the sector's earnings growth to 23%yoy. As a result of the weak economy,
sales are not likely to improve until 2H15, and some retailers (BIGC and
HMPRO) would open fewer branches this year, but this would not have a
significant adverse effect on the commerce sector's earnings.
 Top picks: CPALL, ROBINS
Already passed their bottom and likely to rebound significantly again soon,
this is a good entry for retail stocks. The share prices have not reflected
positive factors yet after underperforming the market for over two years;
this is a good entry point. Top picks are CPALL(FV@B53) and
ROBINS(FV@B64). CPALL is attractive because its profit has rebounded
more significantly than peers. ROBINS is still less expensive than the sector
and previous averages, and its profit already passed its bottom.
Key Data (Bm)
FY: Dec 31
Sales
Norm Profit
Net Profit
PER (x)
PBV (x)
ROAA %
Gross margin %
Source : ASPS Research
FY13A
624,604
29,777
29,464
32.4
7.9
25.5%
18.8%
FY14A
735,524
29,549
29,495
32.4
7.0
22.9%
17.2%
FY15A
826,589
36,139
36,139
26.4
6.2
24.8%
17.1%
FY16F
937,179
45,632
45,632
20.9
5.2
27.0%
17.2%
FY17F
1,054,741
57,008
57,008
16.8
4.5
28.8%
17.4%
Kawee Manitsupavong
License No.: 003974
[email protected]
Anuwat Srikajornratkul
License No.: 045698
[email protected]
This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research
team. Given that this is a rough-and-ready translation, Asia Plus Securities cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts' interviews
with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but we
cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
Industry Update
Research Department
Net Profit and Normalized Profit Margin
(Bm)
Net profit
1Q15
BIGC
CPALL
HMPRO
MAKRO
ROBINS
BEAUTY
BJC
Total
1Q14
Norm margin
YoY
4Q14
1,440
3,408
734
1,539
614
76
529
1,256
2,699
726
1,271
539
52
516
14.7%
26.3%
1.1%
21.1%
14.0%
45.4%
2.5%
8,341
7,059
18.2% 8,802
QoQ
1Q15
2,519 -42.8%
2,509 35.8%
1,029 -28.7%
1,480
4.0%
595
3.2%
105 -27.4%
564
-6.2%
1Q14
YoY
4Q14
QoQ
4.8%
3.6%
6.0%
4.0%
10.2%
21.2%
5.0%
4.3%
3.1%
6.6%
3.7%
9.1%
19.2%
5.4%
0.5%
0.4%
-0.6%
0.3%
1.1%
2.1%
-0.4%
7.9%
2.6%
7.9%
3.9%
8.9%
24.9%
4.8%
-3.1%
0.9%
-2.0%
0.0%
1.3%
-3.7%
0.2%
4.3%
4.0%
0.3%
4.5%
-0.2%
-5.2%
Source : ASPS Research
Gross Margin SG&A/Sales and SSG
Gross margin
(Bm)
1Q15
BIGC
CPALL
HMPRO
MAKRO
ROBINS
BEAUTY
BJC
1Q14
13.2%
21.4%
25.9%
9.9%
24.7%
67.9%
24.1%
Total
18.4%
13.3%
20.9%
26.1%
8.9%
25.1%
67.9%
23.0%
18.0%
SG&A/Sales
YoY
4Q14
QoQ
-0.2%
0.5%
-0.2%
0.9%
-0.4%
0.1%
1.2%
16.9%
21.7%
25.5%
9.6%
24.7%
66.6%
21.8%
-3.7%
-0.3%
0.3%
0.3%
0.0%
1.4%
2.3%
0.4% 19.0%
-0.6%
1Q15
1Q14
18.2%
17.9%
23.9%
7.1%
27.0%
43.3%
17.4%
16.4%
YoY
18.3%
19.1%
23.7%
6.5%
24.4%
46.3%
16.7%
-0.1%
-1.2%
0.3%
0.5%
2.6%
-3.0%
0.7%
16.9%
-0.4%
1Q15
4Q14
16.9%
19.7%
22.1%
6.8%
27.0%
36.9%
15.8%
17.0%
QoQ
SSSG
1.3%
-1.9%
1.8%
0.2%
0.0%
6.3%
1.6%
-0.2%
0.3%
-2.7%
2.8%
-6.6%
17.7%
N.A.
-0.6%
-1.3%
Source : ASPS Research
Branches expansion
B ranches
180
H yperm arkets 6
16
12
150
Superm arkets 10
18
12
120
B ranches
400
B ranches
End-2015 New
End-2014 New
End-2013 New
End-2012 New
End-2011 New
Branches 10,000
Branches
Branches
Branches 8,000
Branches
600
698
607
546
55
300
57
6,000
90
58
200
60
120
12
10
13
9
13
7
8
5
45
52
30
4,000
7
6
5
5
49
6276
40
100
2,000
40
130
60
25
-
0
B IG C *
HM PRO
M A KR O
R O B IN S
C P A LL
B E A UT Y
0
B JC
Source : ASPS Research
***The companies’ branch expansion targets may be different from our forecast; BIGC reduced the number of new hypermarket branches to two.
Key Assumption
Rec.
BIGC
CPALL
HMPRO
MAKRO
ROBINS
BEAUTY
BJC
HOLD
BUY
BUY
BUY
BUY
BUY
HOLD
Closing
Price
(B)
213.00
46.00
6.60
36.25
45.75
4.00
36.25
Fair
Value
(B)
240.00
53.00
9.20
42.00
64.00
5.00
42.00
Upside
(%)
12.7%
15.2%
39.4%
15.9%
39.9%
25.0%
15.9%
EPS EPS Growth
(B)
(%)
10.0
14%
1.5
32%
0.3
14%
1.3
25%
2.0
17%
0.1
25%
1.3
21%
2015F
P/E
(X)
21.3
30.9
22.9
28.6
22.5
31.9
28.4
PBV Div Yield
(X)
(%)
3.6
1.4
11.2
1.7
4.7
4.2
12.2
2.6
3.6
2.1
10.3
30.9
3.0
2.0
Source : ASPS Research
2