20140319-Maybank_KERPL-Daily_Edge_12页_400kb

Daily Edge Summary - 19 March 2014

Core Content Overview

This document provides an analysis of the financial performance and outlook for Robinsons Retail Holdings Inc (RRHI), a key player in the consumer sector. It also includes updates on other financial sectors and market activities, including banking and utilities.

Key Information

RRHI Performance and Outlook

• Stock Price: PHP67.60
• Target Price: PHP77.50
• Recommendation: BUY
• 2013 Adjusted Net Income: PHP2.68b, up 151% from 2012, driven by a 17% increase in net sales and improved margins.
• 2013 Net Sales: PHP67.3b, aligning with the forecast of PHP67.7b.
• 2013 Gross Profit: PHP14.3b, up 30%, due to better supplier support and discounts.
• 2013 EBITDA: PHP5.2b, up 63%, with improved gross profit margin and lower cash operating costs.
• 2013 Gross Margin: Improved by 215bps to 21.3%
• 2013 Net Profit Margin: Improved by 190bps to 4%
• 2014 Outlook: Management expects net sales and net selling space to grow by mid to high teens organically, with gross profit margin to improve by 40bps.
• 2014 Net Sales Forecast: PHP89.8b, up 33.6% YoY.
• 2014 Operating Income Forecast: PHP5b, up 22.5% YoY.
• 2014 Net Income Forecast: Expected to grow over 30% due to higher interest income.
• Store Expansion: 152 new stores opened in 2013, increasing net selling space by 11% to 597k sqm.
• 2014 Store Openings: 49 stores opened by end-February, with 160 contracts secured and 180 under negotiation.
• New Store Mix: 40% in Visayas-Mindanao, 36% in Luzon (outside Metro Manila), and the rest in Metro Manila.
• New Supermarket Formats:
  • One high-end supermarket (Robinsons Selection)
  • Seven to eight compact neighborhood grocery stores
  • Wholesale-retail supermarkets (Jaynith's Supermarkets)
• Capex Forecast: PHP7b for 2014, with 75% allocated to new stores and 17% for renovations.

Market Highlights

• Banks:
  • MBT closed its public offering of Basel III-compliant Tier 2 notes early due to oversubscription.
  • The final issue size may vary and will be determined within the week.
  • Debt carries a 5.375% coupon rate, 50bps higher than a government issuance.
• Utilities:
  • PEMC set new regulated WESM rates for November and December 2013.
  • New rates should lower electricity charges for December and January billing periods.
  • MER is still awaiting official revised invoices to compute new rates.

Key Financial Metrics

Key Insights

• RRHI's Growth Drivers: Expansion and improved margins are the main growth drivers in 2014F.
• Segment Performance:
  • Drug stores and larger formats were the top contributors to EBITDA growth.
  • Supermarkets remained the largest contributor to sales and EBITDA.
  • Smaller store formats showed stronger SSSG, while supermarkets and department stores had flattish growth.
• Market Outlook:
  • The company is actively seeking M&A targets, particularly in regional supermarkets and drug stores.
  • It is also exploring international brands for expansion into the Philippines.

Upcoming Events

• 19 Mar: Metro Pacific Investments Corporation
• 21 Mar: Travellers International Hotel Group, Inc.
• 24 Mar: Trans-Asia Oil and Energy Development Corp.
• 31 Mar: Col Financial Group, Inc.

Valuation Metrics

Conclusion

RRHI's 2013 results were largely in line with expectations, driven by store expansion, acquisitions, and improved margins. The company is positioned for continued growth in 2014F, with a focus on new store openings and margin improvements. Analysts maintain a BUY recommendation, with a target price of PHP77.50, indicating a 15% upside. The company is also actively pursuing M&A opportunities and international expansion, which could further boost its earnings.