20150819-Maybank_KERPL-Less_aggressive_store_expansion_11页_484kb

Summary of Robinsons Retail Holdings (RRHI PM)

Core Content

Robinsons Retail Holdings (RRHI PM) reported strong financial performance in the first half of 2015 (1H15), with net income increasing by 36% to PHP1.86b, driven by interest income and a growing scale that attracted additional supplier support. The company's net sales grew by 12% to PHP41.4b, with the supermarket segment remaining the most significant contributor, accounting for 48% of net sales, 52.1% of EBIT, and 48.3% of EBITDA. EBITDA increased by 12.7% to PHP2.76b in 1H15, with the supermarket segment showing a robust growth of 18.2%.

The company ended 1H15 with 1,399 stores and a gross floor area (GFA) of 901k sqm, a 12.9% increase YoY. Despite opening 100 new stores, RRHI closed 28 underperforming ones, mainly in the specialty and DIY segments, resulting in a net addition of 72 stores. The company is planning to add less than 150 stores in 2H15 due to a more competitive environment and a revised capital expenditure (Capex) target of PHP5b for the full year, lower than the initial guidance of PHP6b.

Key Financial Metrics

• Share Price: PHP72.95
• Target Price: PHP85.00 (+17%)
• Market Cap (USD): 2.2B
• Average Daily Turnover (USD): 2M
• Free float (%): 35.0
• Issued Shares (m): 1,366
• Market Capitalization: PHP99.7B
• Major Shareholders:
  • GOKONGWEI FAMILY: 35.0%
  • GOKONGWEI LANCE Y: 11.7%
  • GOKONGWEI PE ROBINA Y: 7.7%

Financial Performance Highlights

• Net Income: Grew by 36% to PHP1.86b in 1H15, with PHP1.08b in 2Q15.
• EBITDA: Increased by 12.7% to PHP2.76b in 1H15, and 11.7% to PHP1.57b in 2Q15.
• Gross Margin: Improved to 21.8% in 1H15 from 21.3% in the previous year.
• EBITDA Margin: Increased to 6.6% in 1H15 from 6.6% in 1H14.
• Core Net Profit: Rose to PHP4,356m in FY15E, with a 36.2% growth in 1H15.
• Core EPS: Increased to PHP3.15 in FY15E, with a 20.7% growth in 1H15.
• Net Dividend Yield: Improved to 1.0% in FY15E from 0.0% in FY13A.
• ROAE: Increased to 11.3% in FY15E from 9.4% in FY13A.
• ROAA: Rose to 7.7% in FY15E from 6.5% in FY13A.
• EV/EBITDA: Decreased to 9.3 in FY15E from 16.2 in FY13A.

Segment Analysis

• Supermarkets:

  • Net sales: PHP19.9b in 1H15, up 9.3% YoY.
  • EBITDA: PHP1.3b in 1H15, up 18.2% YoY.
  • SSSG: Slowed to 1% in 2Q15 from 3.4% in 1Q15 due to a store fire and high base effects.

• Department Stores:

  • Net sales: PHP6.7b in 1H15, up 9% YoY.
  • EBITDA: PHP490m in 1H15, up 11.1% YoY.
  • SSSG: Increased to 5.1% in 1H15 from 5.3% in 2Q15.

• DIY Stores:

  • Net sales: PHP4.6b in 1H15, up 20.6% YoY.
  • EBITDA: PHP434m in 1H15, up 3.2% YoY.
  • SSSG: Up to 4.5% in 1H15 from 4.3% in 2Q15.

• Convenience Stores:

  • Net sales: PHP2.66b in 1H15, up 20% YoY.
  • EBITDA: PHP126m in 1H15, down 14.3% YoY.
  • SSSG: Up to 5% in 1H15 from 4.9% in 2Q15.

• Drug Stores:

  • Net sales: PHP3.83b in 1H15, up 11.4% YoY.
  • EBITDA: PHP169m in 1H15, up 5.3% YoY.
  • SSSG: Down to 0.3% in 1H15 from 1.5% in 2Q15.

• Specialty Stores:

  • Net sales: PHP4.12b in 1H15, up 21.2% YoY.
  • EBITDA: PHP211m in 1H15, up 34.7% YoY.
  • SSSG: Up to 1.9% in 1H15 from 1% in 2Q15.

Capital and Liquidity

• RRHI infused PHP3.15b into Robinsons Savings Bank (RSB) in 2Q15, which is 40% owned by the company.
• At end-June, RRHI remained very liquid with PHP24b in cash and financial assets.
• The company had PHP158m in short-term bank debt.
• RRHI's net debt/equity remained at net cash throughout the reporting period.

Investment and Dividend

• Core P/E: Decreased to 23.2 in FY15E from 36.3 in FY13A.
• Net Dividend Yield: Improved to 1.0% in FY15E from 0.0% in FY13A.
• Net DPS: Increased to PHP0.71 in FY15E from PHP0.00 in FY13A.

Market and Analyst Views

• Maybank maintains a BUY rating with a PHP85 target price.
• The Maybank Consensus target price is PHP91.20, slightly higher than RRHI's target.
• The Market Recs show 9 positive recommendations, 2 neutral, and 0 negative.
• RRHI's net income for 2015 is forecasted at PHP4,356m, slightly higher than the Maybank Consensus of PHP4,318m.

Conclusion

RRHI PM's 1H15 results show a solid performance with net income up 36% and EBITDA up 12.7%, driven by the supermarket segment. Despite a slowdown in same-store sales growth, the company's effective cost management and growing scale supported EBITDA expansion. The company is adopting a more conservative approach to store expansion and has sufficient liquidity to support its operations and investments. The BUY rating and PHP85 target price reflect confidence in the company's future performance and growth potential.