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Pi Securities PCL, Thailand

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Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

Central Retail Corp Ltd / Equity Bottom-Up

<p><strong>CRC reported 3Q20 net profit of Bt837m (-40%YoY, flip from net loss of Bt2.6bn in 2Q20), below our expectation.</strong></p><div>• The better QoQ performance was a result of easing lockdown and reopening all stores in May 20. Meanwhile, 3Q20 results still drop YoY due to weak domestic consumer spending.</div><div></div><div>• We cut 2020-22E earnings forecast by 80%, 7% and 4%, respectively to factor in weaker consumer spending than our expected. However, we expect 4Q20 performance continue to grow QoQ, supported by government measures and company’s promotions.</div><div></div><div>• We still like CRC for its long-term outlook given leading position in domestic and overseas retail industry with diversified platforms and customer base expansion in Vietnam.</div><p></p><p><strong>We maintain our BUY rating with new target price of Bt37.25(-13% from previous target price) derived from a DCF (10% WACC, 2% TG), implies 24.5xPE’21E, which represents a 4% discount to the World Consumer Discretionary sector.</strong></p>

CRC reported 3Q20 net profit of Bt837m (-40%YoY, flip from net loss of Bt2.6bn in 2Q20), below our expectation.• The better QoQ performance was a result of easing lockdown and reopening all stores in May 20. Meanwhile, 3Q20 results still drop YoY due to weak domestic consumer spending.• We cut 2020-22E earnings forecast by 80%, 7% and 4%, respectively to factor in weaker consumer spending than our expected. However, we expect 4Q20 performance continue to grow QoQ, supported by government measures and company’s promotions.• We still like CRC for its long-term outlook given leading position in domestic and overseas retail industry with diversified platforms and customer base expansion in Vietnam.We maintain our BUY rating with new target price of Bt37.25(-13% from previous target price) derived from a DCF (10% WACC, 2% TG), implies 24.5xPE’21E, which represents a 4% discount to the World Consumer Discretionary sector.

CRC: Expect 4Q20 to Grow QoQ Backed by High Seasonality

<p><strong>We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest home-improvement player in Thailand.</strong></p>
<ul>
<li>We expect 3Q20 earnings to grow to Bt189m (+41%YoY, 29%QoQ) driven by a strong SSSG at 9%, turning profit of Surin branch after one month operation, and improving margin from higher retail sales contribution.</li>
<li>We foresee SSSG at 9%YoY in 3Q20 mainly driven improving contribution from Ubon Ratchathani branch due to low base in 3Q19.</li>
<li>We revised up our sales and net profit forecast by 5% and 12% in 2020E to factor in strong SSSG than our expectation.</li>
</ul>
<p><strong>We still like DOHOME for its 1) cheapest valuation with high growth compared to peers; 2) the positioning of all its stores in locations of high potential demand; 3) plan to expand its store network by 60% within the next two years; and 4) the ample room to grow its margin.</strong></p>

We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest home-improvement player in Thailand.

We expect 3Q20 earnings to grow to Bt189m (+41%YoY, 29%QoQ) driven by a strong SSSG at 9%, turning profit of Surin branch after one month operation, and improving margin from higher retail sales contribution.
We foresee SSSG at 9%YoY in 3Q20 mainly driven improving contribution from Ubon Ratchathani branch due to low base in 3Q19.
We revised up our sales and net profit forecast by 5% and 12% in 2020E to factor in strong SSSG than our expectation.

We still like DOHOME for its 1) cheapest valuation with high growth compared to peers; 2) the positioning of all its stores in locations of high potential demand; 3) plan to expand its store network by 60% within the next two years; and 4) the ample room to grow its margin.

DOHOME: Expect SSSG Stronger than Peers in 2H20 and 2021

<p><strong>Yesterday's meeting came out positive tone. The acquisition of COL will strengthen its omni-channel business and expand its customer base to B2B customers.</strong></p>
<div>• The company approved the acquisition of COL and will make a tender offer for all 640 million shares of COL with the offering price of Bt19 or Bt12bn in total.</div>
<div>• Growth from acquisitions will reflect in 2021 earnings.</div>
<div>• Revised 2021-22E earnings forecast up by 11% and 17%, respectively.</div>
<div>• We believe earnings will grow 10% CAGR in the next three year, supported by more comprehensive distribution channel through the omni-channel platform and improved management efficiency.</div>
<p></p>
<p><strong>We maintain our BUY rating  with a new target price of Bt42.6, which is derived from a DCF (10% WACC, 2% TG). Our target price implies 26xPE’21E, which represents a 2% discount to the World Consumer Discretionary sector.</strong></p>

Yesterday's meeting came out positive tone. The acquisition of COL will strengthen its omni-channel business and expand its customer base to B2B customers.
• The company approved the acquisition of COL and will make a tender offer for all 640 million shares of COL with the offering price of Bt19 or Bt12bn in total.
• Growth from acquisitions will reflect in 2021 earnings.
• Revised 2021-22E earnings forecast up by 11% and 17%, respectively.
• We believe earnings will grow 10% CAGR in the next three year, supported by more comprehensive distribution channel through the omni-channel platform and improved management efficiency.

We maintain our BUY rating  with a new target price of Bt42.6, which is derived from a DCF (10% WACC, 2% TG). Our target price implies 26xPE’21E, which represents a 2% discount to the World Consumer Discretionary sector.

CRC: Acquisition of COL Will Encourage Hardline and Omni-Channel Business

<p><strong>CRC reported 2Q20 net loss of Bt2.6bn compared to net profit of Bt1.3bn and Bt743m in 2Q19 and 1Q20, respectively, the worst quarter from available data.</strong></p>
<div>• The closure of certain areas in all department stores during 22 Mar-16 May 20 according to government order is a major cause of the drop in earnings.</div>
<div>• Also, gross margin narrowed to 21.6% from 29.3% in 2Q19 due to increase mix of hardline and food segment and online sales as well as discount given to customers to boost the sales.</div>
<div>• We expect CRC’s earnings should recover from 3Q20E onwards given re-opening all department stores since 17 May 20 and continue to expand new department store.</div>
<div>
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</div>
<p><strong>We maintain our BUY rating with the target price of Bt45.0, which is derived from a DCF (12% WACC, 2% TG). Our target price implies 66.5xPE’20E, which represents a 13% discount to the Thai Consumer Discretionary sector.</strong></p>

CRC reported 2Q20 net loss of Bt2.6bn compared to net profit of Bt1.3bn and Bt743m in 2Q19 and 1Q20, respectively, the worst quarter from available data.
• The closure of certain areas in all department stores during 22 Mar-16 May 20 according to government order is a major cause of the drop in earnings.
• Also, gross margin narrowed to 21.6% from 29.3% in 2Q19 due to increase mix of hardline and food segment and online sales as well as discount given to customers to boost the sales.
• We expect CRC’s earnings should recover from 3Q20E onwards given re-opening all department stores since 17 May 20 and continue to expand new department store.

 

We maintain our BUY rating with the target price of Bt45.0, which is derived from a DCF (12% WACC, 2% TG). Our target price implies 66.5xPE’20E, which represents a 13% discount to the Thai Consumer Discretionary sector.

CRC: 3Q20 Earnings Should Recovery After Re-Opening All Department Stores

<p><strong>Yesterday analyst meeting came out with a neutral tone. We maintain HOLD rating with a target price of Bt15, which is derived from 33xPE’21E, a 40% premium to Thai Consumer Discretionary.</strong></p><p><strong>Key takeaway:</strong></p><ul>
<li>SSSG turned positively at double digit and low single digit growth during May-June and July 2020 respectively, driven by demand recovery.</li>
<li><span>HMPRO maintains its stores expansion plan at two stores (+1.7%YoY to 115 stores) in 4Q20.</span></li>
<li><span>Expect earnings to recover HoH in 2H20 driven by continuing demand recovery and better product mix. However, we believe improving earnings momentum already priced in. Any correction in share price will be an opportunity to accumulate to realize strong earnings recovery in 2021.</span></li>
</ul><p><strong>We still like HMPRO for its 1) higher profitability compared to peers; 2) SSSG in recovering phase; 3) continuing stores expansion; and 4) long-term growth driver from Omni-channel sales.</strong></p>

Yesterday analyst meeting came out with a neutral tone. We maintain HOLD rating with a target price of Bt15, which is derived from 33xPE’21E, a 40% premium to Thai Consumer Discretionary.Key takeaway:
SSSG turned positively at double digit and low single digit growth during May-June and July 2020 respectively, driven by demand recovery.
HMPRO maintains its stores expansion plan at two stores (+1.7%YoY to 115 stores) in 4Q20.
Expect earnings to recover HoH in 2H20 driven by continuing demand recovery and better product mix. However, we believe improving earnings momentum already priced in. Any correction in share price will be an opportunity to accumulate to realize strong earnings recovery in 2021.
We still like HMPRO for its 1) higher profitability compared to peers; 2) SSSG in recovering phase; 3) continuing stores expansion; and 4) long-term growth driver from Omni-channel sales.

HMPRO: 2H20 Earnings Momentum Already Priced In

Thailand

Home Product Center Public Company Limited is a retailer of building materials and home improvement products.

Siam Global House PCL is a retailer of home related products for construction, repair, decoration, and renovation. The Company sells construction materials, hand tools, furniture, and garden tools.

Com7 Public Company Limited operates a chain of retail outlets that imports, retails, and distributes computers and IT-related products in Thailand. The Company offers products, such as smartphones, tablets, notebooks, and computer sets. Com7 also offers computer components, such as CPUs, hard drives, and network and accessories.

Dohome Public Company Limited operates as a furnishing store. The Company retails hardware, tools, agricultural machinery, furniture, hvac equipment, and other related products. Dohome serves customers in Thailand.

Saha Pathanapibul Public Company Limited distributes consumer products including toiletries, instant noodles, detergents, canned foods, snacks and candies. The Company markets more than 100 brands of products such as Mama instantnoodles, Pao detergents, and Kodomo baby powder and lotion.

Saha Pathanapibul Public Company Limited (SPC TB)

I.C.C. International Public Company Limited imports and distributes a variety of products including cosmetics, clothing for men, women and children, sporting goods, footwear, food, beverages, as well as sewing machines, computers, fax machines, electric appliances, and medical equipment.

PTG Energy PCL provides ready-made gasoline at retail stations. The Company operates gasoline tank farms and gasoline retail stations throughout Thailand.

Singer Thailand Public Company Limited assembles and distributes Singer brand household appliances such as sewing machines, refrigerators, televisions, washing machines, stereos, VCRs and gas stoves.  The Company has its own retail network and offers installment financing to its customers.

Minor International PCL is a global company focused on three primary businesses including restaurants, hotels and lifestyle brands distribution.

Central Plaza Hotel Public Company Limited owns and manages hotels and quick service restaurants. The Company operates its hotels under the banner of Centara Hotels & Resorts and franchises western and Japanese quick service restaurants.

Harvey Norman Holdings Limited is a holding company for companies and trusts in a third party franchise agreement. The franchises operate stores under the name "Harvey Norman Discounts," selling home wares and electrical goods. The Company also provides advisory and advertising to the franchises. In addition, the Company provides consumer finance and has property investments.

Hainan Island Construction Co Ltd.  is a property development company. The Company also operates regional malls and hotels.

RYOHIN KEIKAKU CO., LTD. is a retailer and wholesaler of Mujirushi Ryohin brand products, which were originally a generic private-brand product.  The Company's product line includes knitwear, food, and household items

Guangzhou Friendship Group Co., Ltd operates supermarkets and department stores in Guangzhou, China.  The Company sells a variety of consumer products, including apparel, food and beverages, electronics, jewelry, cosmetics, and electric appliances.  Guangzhou Friendship also leases real estate properties.

Guangzhou Friendship Group Co, Ltd. (000987 CH)

Ollie's Bargain Outlet Holdings, Inc. operates a chain of retail stores that offers brand name products at discounted and closeout prices. The Company provides products, including housewares, food, books and stationery, bed and bath, floor coverings, toys, and hardware.

Ollie'S Bargain Outlet Holdings (OLLI US)

Dillard's, Inc. operates retail department stores located primarily in the southwestern, southeastern, and midwestern United States. The Company offers name-brand and private-label merchandise, including fashion apparel and home furnishings.

Macy's, Inc. operates department stores in the United States.  The Company also operates direct mail catalog and electronic commerce subsidiaries. Macy's retail stores sell a wide range of merchandise, including men's, women's and children's apparel and accessories, cosmetics, home furnishings and other consumer goods.

Nordstrom, Inc. is a fashion retailer of apparel, shoes, and accessories for men, women, and children.  The Company operates through multiple retail channels, discount stores, boutiques, catalogs, and on the Internet. Nordstrom, Inc. also offers, through a subsidiary, private label card credit and debit cards.

B&M European Value Retail S.A. operates as a general merchandise discount retailer. The Company sells products ranging electronics to home goods.

Canadian Tire Corporation Limited is a family of businesses that includes a retail segment, a financial services division and CT REIT. The Company's retail business provides Canadians with products for life in Canada across its living, playing, fixing, automotive and seasonal categories. Canadian Tire Corporation's  retail products include casual, industrial and active wear.

Central Retail Corp Ltd operates general merchandise stores. The Company offers electronics, sports, stationery, home improvement, and office products. Central Retail serves customers in Thailand.

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Central Retail Corp Ltd (CRC TB)

CRC: Expect 4Q20 to Grow QoQ Backed by High Seasonality

We maintain our BUY rating with new target price of Bt37.25(-13% from previous target price) derived from a DCF (10% WACC, 2% TG), implies...

Pi Securities PCL, Thailand

DOHOME: Expect SSSG Stronger than Peers in 2H20 and 2021

We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest...

Pi Securities PCL, Thailand

CRC: Acquisition of COL Will Encourage Hardline and Omni-Channel Business

Yesterday's meeting came out positive tone. The acquisition of COL will strengthen its omni-channel business and expand its customer base to B2B...

Pi Securities PCL, Thailand

CRC: 3Q20 Earnings Should Recovery After Re-Opening All Department Stores

CRC reported 2Q20 net loss of Bt2.6bn compared to net profit of Bt1.3bn and Bt743m in 2Q19 and 1Q20, respectively, the worst quarter from available...

Pi Securities PCL, Thailand

HMPRO: 2H20 Earnings Momentum Already Priced In

Yesterday analyst meeting came out with a neutral tone. We maintain HOLD rating with a target price of Bt15, which is derived from 33xPE’21E, a 40%...

Pi Securities PCL, Thailand

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