20180405-辉立证券-Chic_Republic__First_unique_home_fashion_store_in_Thailand_23页_3mb

CHIC Republic Summary

Core Content

CHIC Republic is a unique home fashion store chain in Thailand, founded in 2009 by Mr. Kijja Pattamasattayasonthi, a seasoned veteran in the furniture and home décor industry with over 30 years of experience. The company operates large, stand-alone stores offering a one-stop shopping experience for furniture, home décor, household items, decorative lights, and mattresses & bedding. It has two main brands: 'Chic' for mid-to-upper income customers and 'Rina Hey' for the mid-to-low end market, with the latter launched in 2016.

Main Points

• IPO Proceeds Utilization: CHIC plans to use IPO funds for store expansion, including new locations in Bangkok's Ramintra area, Udon Thani, Chiang Mai, and its first overseas store in Cambodia. It also aims to develop an e-commerce platform as part of its O2O marketing strategy.
• Earnings Recovery: CHIC's FY17 profit declined by 37.3% due to sagging project sales and higher operating costs. However, FY18 is expected to see a sharp recovery with a 151% year-on-year profit growth to Bt82mn, driven by improved in-store sales, better gross profit margins, and lower SG&A expenses.
• Market Outlook: The residential property market in Thailand is expected to grow due to urbanization, infrastructure development, and expansion of transport networks. This should increase demand for furniture and home décor, benefiting CHIC.
• Valuation: CHIC is valued at Bt1.97/share using DCF, assuming a WACC of 11.6% and a terminal growth rate of 1.2%. The target P/E ratio of 32.8x for FY18 is in line with the commerce sector's average, and is expected to drop to 20.4x in FY19 as growth normalizes.
• Business Model: CHIC's revenue comes from in-store sales, project sales, and retail space rentals. It currently has four stores in Bangkok and one in Pattaya, with plans to expand further.
• Competitive Landscape: CHIC competes with major players like IKEA, SB Furniture, Index Living Mall, and Modernform. Its unique design and product positioning allow it to differentiate itself in the market.

Key Financials

Expansion Plans

• Domestic Expansion: CHIC plans to open new stores in Ramintra, Udon Thani, Chiang Mai, and possibly Phuket and Hat Yai.
• Overseas Expansion: The first overseas store is planned for Cambodia in 3QFY18.
• E-commerce: CHIC is developing an online platform to enhance its digital presence and meet the needs of new-generation consumers.

Financial Advisor and IPO Details

• IPO Size: 360 million shares.
• Post-IPO Paid-up Capital: Bt680 million.
• Par Value: Bt0.50/share.
• Financial Advisor: Phillip Securities (Thailand) Public Company Limited.
• IPO Price: Not specified.
• Subscription Period: Not specified.
• Listing: On the Market for Alternative Investment (MAI).

Brand Strategy

• Chic: Targets mid-to-upper income customers with natural wood furniture and unique designs.
• Rina Hey: Targets mid-to-low end customers with affordable knock-down furniture and a simple, loft style.
• Retail Space Rentals: CHIC leases parts of its stores to other brands, including McDonald's, Starbucks, and various restaurants, to diversify revenue and attract more customers.

Revenue Structure

Market Potential

• The residential property market in Thailand is expected to grow, with a focus on luxury condominiums in downtown Bangkok and new developments in major provinces.
• The government's infrastructure projects, such as the Eastern Economic Corridor (EEC), are anticipated to boost property development and, in turn, demand for furniture and home décor.

Conclusion

CHIC Republic is well-positioned for growth, with a strong brand identity, a diversified revenue model, and strategic expansion plans. The company's focus on product uniqueness, combined with the positive outlook for the property market, should support its earnings recovery and long-term profitability.