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Industry Update
Thursday, April 2, 2015
Retail
COMMERCE
Rec : NEUTRAL
Rebound expected in 2H15
Although the profit has already passed its lowest, it is not likely to rebound until 2H15.
Commerce stocks have already undergone correction, so they are currently attractive for
long-term investment. Top picks are CPALL and ROBINS.

Weak purchasing power depresses profit in 1H15. BEAUTY to
grow best
2M15 leading economic figures reflected that consumers' confidence has
remained low as a result of weak purchasing power. Commerce companies
expected same store sales growth not to rebound in 1Q15 and stay weak in
1H15, likely to drop from our projection of 2-3%yoy to 0-1%yoy (same rate as
2H14). However, it would depress the sector's net profit by only 1%. Since most
new branches will be opened in 2H15, 1H15 profit is insignificant, in line with
our initial projection. BEAUTY would probably grow best among peers, with YTD
same store sales growth of over 30%yoy, in line with the target.

Sector Index : 28,515.64
SET Index : 1,525.58
Profit to recover in 2H15
Commerce companies’ earnings are expected to rebound in 2H15 as the
economy rebounds and acceleration of government investment starts to pay off.
Same store sales growth is expected to rise to 4%yoy. We maintain our
earnings forecast, projecting the sector's net profit to grow by 23%. CPALL's
(40% of the sector's earnings) net profit is expected to jump by over 30% from
weak profit base in 2014 (due to high funding cost); excluding extraordinary
items, CPALL's normalized profit is projected to grow by 16%. However, tax
restructuring, namely VAT hike in 2H15, needs to be monitored closely.
Although the government stated that VAT would be maintained, it is still
uncertain and the government may change its mind anytime since total VAT
collection has dropped below target.

Top picks CPALL, ROBINS
Although the share prices have undergone correction, profit of commerce
companies is expected to rebound in 2H15. We recommend undervalued stocks.
Top picks are CPALL(FV@B53) and ROBINS. CPALL's FY2015 P/E ratio of 27x is
close to the sector's average but lower than the previous average (premium).
ROBINS's FY2015 P/E ratio of 23.4x is lower than the sector's average and the
statistic average.
Key Data (Bm)
FY: Dec 31
Sales
Norm Profit
Net Profit
PER (x)
PBV (x)
ROAA %
Gross margin %
Source : ASP Research
FY12A
624,604
29,777
29,464
31.5
7.6
25.5%
18.8%
FY13A
735,524
29,549
29,495
31.5
6.8
22.9%
17.2%
FY14A
826,589
36,139
36,139
26.4
6.2
24.8%
17.1%
FY15F
937,179
45,632
45,632
20.9
5.2
27.0%
17.2%
FY16F
1,054,742
57,007
57,007
16.9
4.5
28.8%
17.4%
Kawee Manitsupavong
License No.: 003974
kawee.re@asiaplus.co.th
Anuwat Srikajornratkul
License No.: 045698
anuwat@asiaplus.co.th
This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research
team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts'
interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but
we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
Industry Update
Research Department

Same store sales to recover in 2H15
The commerce sector's profit is not likely to rebound significantly in 1H15, but
still in line with our forecast. Although 1H15 same store sales growth would
drop from our projection of 2-3%yoy to 0-1%yoy (same rate as 2H14), it
would depress the sector's net profit by only 1%. We maintain our forecast
since a rebound is foreseen in 2H15 after the economy passes its lowest.
Economic components would recover e.g. export (as the global economy
revives) and government investment (some projects would become more
concrete), thus boosting liquidity and reviving investors' confidence. Overall,
same store sales growth is projected to rise to 3-4%yoy in 2H15.

Watch tax restructuring in 2H15
However, restructure of excise tax (liquors, cigarettes, tutor schools,
automotive, etc.), property tax, and especially VAT in 2H15 and 2016 needs to
be monitored closely (not included in our forecast yet) since they will
adversely affect overall purchasing power; no clear conclusion has been made
so far. Although the government stated that VAT would be maintained, it is
still uncertain and the government may change its mind anytime since total
VAT collection has dropped below target. If VAT is raised gradually by 1% each
year from 7% to 8%, it would have no remarkable overall effect. However,
larger VAT hike may have significant adverse effect on purchasing power as
well as the sector's earnings.
If the VAT hike is larger than expected and economic recovery is slower than
projected, the commerce sector's earnings (high volume and low margin)
would be affected by a larger decline in gross profit margin than same store
sales. Initially, we project the sector's FY2015 gross profit margin to rise by
40bp, an increase in every company except HMPRO (down 40bp since lowmargin Mega Home has accounted for larger proportion of HMPRO's profit).
Every 10bp increase in gross profit margin from our forecast will boost the
sector's profit by 1.4%
2
Industry Update
Research Department
Same Store Sales Growth vs GDP Growth
10.0%
Same Store Sales Growth
Same Store Sale s Growth (SSSG)
11.5%
12.0%
8.8%
7.9%
8.0%
6.6%
6.0%
6.5%
3.7%
4.0%
7.9%
8.0%
2.9%
2.5%
2.7%
1.1%
0.9%
0.8%
0.6%
2009
2010
0.1%
2011
2012
0.7%
2014
2013
3Q56
0.6%
4Q56
-2.0%
1Q14
-0.5%
-1.0%
3Q14
0.4%
2Q14
6.9%
6.3%
6.6%
6.2% 6.0%
6.1%
6.0%
-0.8%
4.8%
4.6%
4Q14
4.1%
2.9%
2.9%
-4.0%
2.0%
4.5%
2.2%
1.3%
GDP Grow th
0.5%
0.3%
1.1%
0.9%0.8%
0.3%
-1.0%
-0.8%
0.7%
0.0%
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1H15F
2H15F
0.0%
-2.0%
Source : ASP Research
5.0%
3.5%
4.0%
-2.3%
Same Store Sales Grow th
7.8%
6.8%
6.6%
6.2%
6.3%
6.0%
2.3%
-0.1%
0.0%
2008
9.3% 9.2%
4.5%
4.0%
2.0%
9.6%
9.2%
10.0%
7.8%
6.0%
Source : ASP Research
Branches expansion
B ranches
B ranches
Hypermarket 6
180
16
150
12
Super market 10
18
120
12
New Branches end of 2014 10,000
New Branches end of 2013
New Branches end of 2012
New Branches end of 2011 8,000
Branches end of 2011
B ranches
400
600
600
607
546
65
300
78
6,000
90
60
120
30
58
200
12
10
13
8
13
7
8
5
45
52
4,000
7
7
5
5
49
6276
40
100
2,000
130
60
25
0
-
B IG C *
HM PRO
M A KR O
40
R O B IN S
C P A LL
0
B E A UT Y
B JC
Source : ASP Research
Key Assumption
Rec.
BIGC
CPALL
HMPRO
MAKRO
ROBINS
BEAUTY
BJC
HOLD
BUY
BUY
HOLD
BUY
BUY
HOLD
Closing
Price
(B)
239.00
40.25
8.15
36.00
48.00
42.50
37.75
Fair
Value
(B)
240.00
53.00
9.80
42.00
64.00
50.00
42.00
Upside
(%)
0.4%
31.7%
20.2%
16.7%
33.3%
17.6%
11.3%
EPS EPS Growth
(B)
(%)
10.0
14%
1.5
32%
0.3
14%
1.3
25%
2.0
17%
1.3
25%
1.3
21%
2015F
PER
(X)
23.9
27.1
28.3
28.4
23.6
33.9
29.5
PBV Div Yield
(X)
(%)
4.1
1.2
9.8
2.0
5.8
3.4
12.2
2.7
3.7
2.0
10.9
2.9
3.2
2.1
Source : ASP Research
3