Target price : Bt81.70
Recommendation : BUY
Closing Price (18 May 09) : Bt69.75
1Q09 profit down 23.9% YoY and 16.8% QoQ
- First-quarter 2009 sales were down 1% YoY but flat QoQ.
- MAKRO posted a net profit of Bt297m in 1Q09, down 23.9% YoY and 16.8% QoQ.
- We revise our 2009 estimates downward as the first-quarter profit accounted for only 16.8% of our previous full-year forecast.
- We however keep a 'Long-Term BUY' recommendation on MAKRO with a 2009 price target of Bt81.70/share.
1Q09 sales down 1% YoY but flat QoQ
MAKRO, Thailand's leading cash-and-carry wholesaler generated sales of Bt18,027m in 1Q09, down 1% YoY but flat QoQ. On a YoY basis, the sales decline was blamed on the absence of sales from Makro Office Center following the spin-off and sagging sales of stores located in tourist destinations in the face of a tourism slump. Service revenue was down 1.8% YoY but up 1.8% QoQ to Bt390m. Other income in this quarter came in at Bt118m, down 5.4% YoY but up as much as 78.2% QoQ.
1Q09 net profit of Bt297m, down 23.9% YoY and 16.8% QoQ
MAKRO posted a net profit decline of 23.9% YoY and 16.8% QoQ to Bt297m in 1Q09. The profit deterioration, both YoY and QoQ reflected: (i) gross margin contraction - In this quarter, gross margin slipped 0.95% YoY and 0.71% QoQ to 5.82%; (ii) a 166.3% YoY rise in interest expenses to Bt12.2m; (iii) virtually no growth in sales dented by slumping sales of stores located in tourist destinations; and (iv) an increase in effective tax rates to 31.6% from 27.5% in the prior quarter.
Cut in 2009 earnings forecast as 1Q09 profit accounts for only 16.8% of previous full-year estimate
The first-quarter profit accounted for only 16.8% of our full-year estimate. The figure is relatively low, compared to our full-year profit forecast of Bt1,770m or Bt7.38 a share, up 5.7% YoY. We also do not expect a strong profit recovery in 2Q09. On this basis, we trim our sales forecast for 2009 by 7% to Bt83,673m and cut our 2009 net profit outlook by 7.69% to Bt1,634m. Our 2009 price target of Bt81.70/share is based on a P/E of 12x. We keep a 'Long-Term BUY' recommendation on MAKRO.
By Phillip Securities (Thailand) Plc. on May 19, 2009
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