4 August 2014

Page | 1 MCI (P) 046/11/2013 Ref.No.: TH2014_0311

Robinson Department Store - ROBINS

2QFY14 results seen pressured by sluggish economic conditions

THAILAND | COMM | COMPANY PREVIEW

BLOOMBERG ROBINS TB │ REUTERS ROBINS.BK

We expect ROBINS to report 2QFY14 net profit of Bt498.56mn, up 11.50% y-y buoyed by new store sales but down 7.49% q-q due to second-quarter low season effect. Normally second-quarter sales are seasonally lower than the first quarter.

We slash our FY14 net profit outlook for ROBINS by 6.25% to Bt2,108.11mn but the new profit target still implies a growth of 6.17% y-y based on assumptions that SSSG will be similar to a year ago.

Rolling forward our valuation to FY15, we set a DCF-based target price of Bt58.75/ share for ROBINS. At current prices, we retain a ‘NEUTRAL’ stance on ROBINS shares.

Management has reaffirmed its FY14 revenue growth guidance of 10% on expectations of a strong recovery of confidence in consumer spending in 2HFY14 on greater political clarity. ROBINS has also left its investment budget unchanged at Bt5.55bn to add five new stores to its portfolio. Of the total, two new stores are planned for opening in 3QFY14 in Roi Et and Chachaengsao provinces and the remaining three stores in 4QFY14 in Prachinburi, Samut Prakarn and Mukdahan provinces. How we view this We expect ROBINS to report 2QFY14 net profit of Bt498.56mn, up 11.50% y-y buoyed by sales from two new stores which were opened in 2QFY13-2QFY14, which would offset an estimated slight contraction of 2% in SSSG as a result of a weak economic recovery though the domestic situation started to show signs of improving in late 2QFY14. Investment Action Rolling forward our valuation to FY15, we set a DCF-based target price of Bt58.75/ share for ROBINS. As the stock looks fully valued at current level, we maintain our ‘NEUTRAL’ rating.

Key Financial Summary

FYE Dec FY10 FY11 FY12 FY13 FY14F FY15F

Revenue (Btmn) 14,794 17,630 21,620 24,300 26,623 30,253

NPAT (Btmn) 1,698 1,453 1,658 1,986 2,108 2,545

NPAT, adj. (Btmn) 1,698 1,453 1,645 1,986 2,108 2,545

EPS (Bt) 1.53 1.31 1.49 1.79 1.90 2.29

EPS, adj. (Bt) 1.53 1.31 1.49 1.79 1.90 2.29

P/E (X),adj. 38.6 45.1 39.5 33.0 31.1 25.7

BVPS (Bt) 7.26 8.17 9.77 10.82 11.88 13.28

P/B (X) 8.1 7.2 6.0 5.5 5.0 4.4

DPS (Bt) 0.62 0.65 0.90 0.86 0.91 1.10

Div. Yield (%) 1.1% 1.1% 1.5% 1.5% 1.5% 1.9%

Source: Bloomberg, PSR est.

**Multiples and yields are based on latest closing price

Analyst Phillip Research Team +65 65311240 research@phillip.com.sg

Robinson Department Store - ROBINS 4 August 2014

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2QFY14 net profit seen up 11.50% y-y on new store sales We forecast ROBINS to report 2QFY14 net profit of Bt498.56mn, up 11.50% y-y buoyed by sales from two new stores which were opened in 2QFY13-2QFY14. The y-y growth rate looks less than what it should be due to an estimated slight contraction of 2% in SSSG as a result of sluggish spending. In q-q terms, 2QFY14 results are expected to be 7.49% lower than 2QFY13 because of second-quarter low season effect. Normally second-quarter sales are seasonally lower than the first quarter. The q-q decline would also be due to a weak recovery in spending as a result of a lag time for spending to pick up after easing political tensions though the political situation in 2QFY14 looked better than in 1QFY14. The forecast is based on assumptions that (i) SG&A expenses will come in at Bt1,442.25mn, which will push SG&A expenses to sales ratio to as high as 25.1% on account of higher depreciation charges from the opening of two new Robinson Life Style Centers and promotional campaigns to boost sales in 2QFY14 and (ii) profits from affiliates will clock in at Bt83.99mn, up 12.4% y-y but down 9% q-q as burgeoning sales of CRC Sports on World Cup windfalls would be offset by downbeat sales of Power Buy depressed by the still sluggish spending. On this basis, we expect its earnings growth to be not as strong as it should be in 2QFY14 as a result of slowing domestic economic conditions especially during the imposition of curfew, which cut deeply into ROBINS sales. Slight earnings cut for FY14 We cut our FY14 net profit outlook for ROBINS by 6.25% to Bt2,108.11mn but the new profit target still implies a growth of 6.17% y-y. The growth rate looks relatively low due chiefly to weak sales growth and higher SG&A expenses to sales ratio. The forecast assumes (1) FY14 sales will be up a meager 9.56% y-y to Bt26,623mn on expectations that (i) SSSG will be similar to a year ago due to spending slowdown in 1HFY14 as a consequence of domestic political tensions and (ii) sales will recover in 2HFY14 especially 4QFY14 benefiting from economic stimulus measures from NCPO including the likes of efforts to settle overdue payments to farmers under the rice pledging scheme which would in turn inject cash into the system and may provide a big boost to ROBINS in 4QFY14, and (2) SG&A expenses to sales ratio will edge up on higher depreciation charges and sales promotional expenses. Full-year EPS and DPS are estimated to be Bt1.90/share and Bt0.91/share respectively for FY14. ‘NEUTRAL’ stance with FY15 DCF-based target price of Bt58.75/share Rolling forward our valuation to FY15, we set a DCF-based target price of Bt58.75/ share for ROBINS. As the stock looks fully valued at current level, we maintain our ‘NEUTRAL’ rating.

Robinson Department Store - ROBINS 4 August 2014

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FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F

Revenue ##### ##### 17,630 21,620 24,300 26,623 30,253 Cash 3,513 2,384 3,023 1,882 1,086 1,389

EBITDA 1,798 2,585 2,782 3,477 3,742 4,317 5,454 Investments 0 622 1,040 219 800 800

Depreciation & Amortisation 718 785 1,058 1,418 1,848 2,445 Accounts Receivables 636 759 847 865 995 1,097

EBIT 1,156 1,867 1,997 2,420 2,324 2,469 3,009 Inventories 941 1,163 1,325 1,667 1,577 1,742

Net Finance (Expense)/Inc 0 0 0 0 4 0 Others 174 175 176 177 178 179

Other i tems 0 0 0 0 0 0 Total current assets 5,264 5,104 6,411 4,810 4,636 5,207

Associates & JVs 253 205 402 358 376 358 PPE 1,887 3,224 4,965 6,752 9,430 11,711

Exceptional i tems 0 0 0 0 0 0 Intangibles 2,604 3,105 3,034 2,812 2,945 2,945

Profit Before Tax 2,120 2,202 2,822 2,682 2,849 3,368 Associates & JVs 1,415 1,620 677 1,102 1,000 1,000

Taxation 343 568 930 456 483 572 Investments 29 29 158 196 190 210

Profit After Tax 1,777 1,634 1,892 2,226 2,366 2,795 Others 1,040 1,183 1,914 3,157 2,306 1,789

Non-control l ing Interest 79 181 234 241 250 250 Total non-current assets 6,975 9,161 10,749 14,020 15,871 17,655

Net Income, reported 1,698 1,453 1,658 1,986 2,116 2,545 Total Assets ##### ###### 14,265 17,160 18,830 20,507 22,862

Net Income, adj. 1,013 1,698 1,453 1,645 1,986 2,108 2,545 Short term loans 0 0 0 0 0 0

Accounts Payables 3,858 4,794 5,947 6,484 6,975 7,726

Others 188 271 201 145 100 110

FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F Total current liabilities 4,046 5,064 6,147 6,629 7,075 7,836

Long term loans 0 0 0 0 0 0

EPS, reported 1.53 1.31 1.49 1.79 1.90 2.29 Others 129 131 157 188 243 281

EPS, adj. 1.53 1.31 1.49 1.79 1.90 2.29 Total non-current liabilities 129 131 157 188 243 281

DPS 0.62 0.65 0.90 0.86 0.91 1.10 Non-control l ing interest 188 331 520 670 820 970

BVPS 7.26 8.17 9.77 10.82 11.88 13.28 Shareholder Equity 6,797 8,064 9,070 10,856 12,013 13,190 14,746

FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F FYE Dec FY09 FY10 FY11 FY12 FY13 FY14F FY15F

CFO P/E (X), adj.** 38.6 45.1 39.5 33.0 31.1 25.7

PBT 2,129 2,202 2,815 2,682 2,841 3,368 P/B (X), adj.** 8.1 7.2 6.0 5.5 5.0 4.4

Adjustments (1) 544 467 1,011 1,483 2,076 EV/EBITDA (X), adj. ###### 16.1 20.4 13.7 14.9 11.8

WC changes (26) 260 484 (4) 593 523 Dividend Yield (%) 1.1% 1.1% 1.5% 1.5% 1.5% 1.9%

Cash generated from ops 2,102 3,006 3,765 3,690 4,917 5,967 Growth & Margins (%)

Others 279 486 586 500 1,229 1,492 Growth

Cashflow from ops 1,823 2,520 3,179 3,190 3,688 4,475 Revenue 15.2% 19.2% 22.6% 12.4% 9.6% 13.6%

CFI EBITDA 43.8% 7.6% 25.0% 7.6% 15.4% 26.3%

CAPEX, net (402) (2,411) (3,051) (3,275) (4,871) (4,490) EBIT 61.5% 7.0% 21.2% -4.0% 6.2% 21.9%

Others 409 (625) 1,288 35 1,426 1,421 Net Income, adj. 67.6% -14.4% 13.2% 20.7% 6.2% 20.7%

Cashflow from investments 7 (3,036) (1,762) (3,241) (3,445) (3,069) Margins

CFF EBITDA margin 17.5% 15.8% 16.1% 15.4% 16.2% 18.0%

Share i ssuance 0 0 0 0 0 0 EBIT margin 12.6% 11.3% 11.2% 9.6% 9.3% 9.9%

Loans , net of repayments 0 0 0 0 0 0 Net Profi t Margin 12.0% 9.3% 8.8% 9.2% 8.9% 9.2%

Dividends (487) (725) (778) (1,090) (1,039) (1,103) Key Ratios

Others 53 112 0 0 0 0 ROE (%) 22.9% 17.0% 16.6% 17.4% 16.8% 18.2%

Cashflow from financing (434) (613) (778) (1,090) (1,039) (1,103) ROA (%) 14.9% 11.0% 10.6% 11.0% 10.8% 11.7%

Net change in cash 1,396 (1,129) 639 (1,141) (796) 303

Effects of exchange rates 0 0 0 0 0 0 Net Debt/(Cash) (3,513) (2,384) (3,023) (1,882) (1,086) (1,389)

CCE, end 3,513 2,384 3,023 1,882 1,086 1,389 Net Gearing (X) 0.05 0.20 0.19 0.26 0.30 0.29

**Based on latest closing price

Source: Company Data, PSR est

Balance Sheet (Btmn)

Per share data (Bt)

Cashflow Statements (Btmn) Valuation Ratios

Income Statement (Btmn)

Robinson Department Store - ROBINS 4 August 2014

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Total Returns Recommendation Rating> +20% Buy 1+5% to +20% Accumulate 2-5% to +5% Neutra l 3-5% to -20% Reduce 4<-20% Sel l 5

We do not base our recommendations entirely on the above quanti tative

return bands . We cons ider qual i tative factors l ike (but not l imited to) a s tock's

ri sk reward profi le, market sentiment, recent rate of share price appreciation,

presence or absence of s tock price catalysts , and speculative undertones

surrounding the s tock, before making our fina l recommendation

Ratings History

PSR Rating System

Remarks

12345

Source: Bloomberg, PSR

0.00

20.00

40.00

60.00

80.00

100.00

Jun

-13

Se

p-1

3

De

c-13

Ma

r-14

Jun

-14

Se

p-1

4

De

c-14

Ma

r-15

Jun

-15

Market Price

Target Price

Robinson Department Store - ROBINS 4 August 2014

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Industry Group Name Sector Name Sector Index

Agro & Food Industry Agribusiness AGRI

[AGRO] Food & Beverage FOOD

Consumer Products Fashion FASHION

[CONSUMP] Home & Office Products HOME

Personal Products & Phamaceuticals PERSON

Financials Banking BANK

[FINCIAL] Finance & Securities FIN

Insurance INSUR

Industrials Automotive AUTO

[INDUS] Industrail Materials & Machinery IMM

Packaging PKG

Paper & Printing Materials PAPER

Petrochemicals & Chemicals PETRO

Steel STEEL

Property & Construction Construction Materials CONMAT

[PROPCON] Construction Services CONS

Property Development PROP

Property Fund & REITs FP&REIT

Resources Energy & Utilities ENERG

[RESOURC] Mining MINE

Services Commerce COMM

[SERVICE] Media & Publishing MEDIA

Health Care Services HELTH

Tourism & Leisure TOURISM

Professionsl Services PROF

Transportation & Logistics TRANS

Technology Electronic Components ETRON

[TECH] Information & Communication Technology ICT

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We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation

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Total ReturnTotal ReturnTotal ReturnTotal Return RecommendationRecommendationRecommendationRecommendation RatingRatingRatingRating RemarksRemarksRemarksRemarks >+20%>+20%>+20%>+20% BuyBuyBuyBuy 1111 >20% upside from the current price>20% upside from the current price>20% upside from the current price>20% upside from the current price

+5% to +20%+5% to +20%+5% to +20%+5% to +20% AccumulateAccumulateAccumulateAccumulate 2222 +5% to +20%upside from the curren+5% to +20%upside from the curren+5% to +20%upside from the curren+5% to +20%upside from the current pricet pricet pricet price ----5% to +5%5% to +5%5% to +5%5% to +5% NeutralNeutralNeutralNeutral 3333 Trade within ± 5% from the current priceTrade within ± 5% from the current priceTrade within ± 5% from the current priceTrade within ± 5% from the current price ----5% to 5% to 5% to 5% to ----20%20%20%20% ReduceReduceReduceReduce 4444 ----5% to 5% to 5% to 5% to ----20% downside from the current price20% downside from the current price20% downside from the current price20% downside from the current price

<<<<----20%20%20%20% SellSellSellSell 5555 >20%downside from the current price>20%downside from the current price>20%downside from the current price>20%downside from the current price

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