Intime Retail [1833.HK]

Transcription

1 Oct 15, 2013 Intime Retail [1833.HK] Q Results: Slower as Expected; concern about Q4 14.2% merchandizing GSP growth in 9M13. Intime released its operational statistics for 9M13: Jan-Sep Gross sales proceeds (GSP) from concessionaire sales and direct sales rose 14.2% year-on-year (YoY) to RMB10,397m, backed by: 1) 11% same store sales growth (SSSG) from 27 stores operated over 12 months; and 2) GSP contribution from five new stores opened in Jun 2012 (1), Sep 2012 (1), Apr 2013 (2) and Sep 2013(1). These figures show slower growth as expected, given: 1) diminishing gold-rush effect on an industry basis; and 2) summer vacation is becoming a low season for retail. 6.2% Q3 SSSG for merchandizing GSP is in line, but Q4 a concern. After the management guidance of high-single-digit SSSG for Q3, we believe the result is in line with our and market expectations, because overall SSSG should be slightly higher with increasing contribution from rental income. But there is more concern for Q4, which was affected by typhoon Fitow during October Golden Week. We believe the strong typhoon will have reduced traffic flow in Zhejiang Province s retail sector. In line so far, but lower full-year forecast. 9M13 merchandizing GSP 14.2% growth is in line with our previous projection of 17.8% for overall 2013E. However, we lower our merchandizing SSSG forecast to 10.8% from 11.8% for the reasons above. As a result, we revise slightly down 2013E our earnings forecast by 1.8%. Reiterate BUY with TP of HK$12.30; top pick in the sector. Intime is trading at 8.7x PER 2014E and 4.6% forward yield. With industry-high 3-year earnings CAGR at 23.2% for E, we believe Intime s profitability will improve through: 1) ramp-up of new stores opened during E; and 2) increasing contribution from rental income supporting traffic flow to department stores. One positive price catalyst could be November Singles Day in China, when Intime will cooperate with its own and other e-commerce platforms to enhance competitiveness E 2014E 2015E Turnover (RMBm) 3,117 3,907 4,767 6,085 7,152 Net profit (RMBm) ,192 1,508 1,838 Net margin (%) Basic EPS (RMB) Change (%) PER (x) China Department Stores BUY Close: HK$8.09 (Oct 11, 2013) Target Price: HK$12.30 (+52%) Price Performance Market Cap US$2,091m Shares Outstanding 2,006m Auditor Ernst & Young Free Float 50% 52W range 3M average daily T/O Major Shareholding Source: Company, Bloomberg Angela Han Lee (852) angelahanlee@chinastock.com.hk John Mulcahy (852) johnmul@chinastock.com.hk HK$ US$5.9m Mr. Shen Guojun (36%) Yield (%) PBR (x)

2 Key Financials P ro fit & lo ss (R M B m) E 2014E 2015E C ash flo w (R M B m) E 2014E 2015E R evenue 3,117 3,907 4,767 6,085 7,152 Profit before tax 1,129 1,321 1,656 2,082 2,537 COGS (948) (1,237) (1,602) (2,065) (2,388) Depreciation and amortisation Gro ss pro fit 2,169 2,670 3,165 4,020 4,764 Change in working capital 1,917 1, Other income and gains Other operating cash flow (974) (2,161) (753) Depreciation and amortisation (282) (382) (472) (513) (575) Operating cash flo w 2, ,279 3,396 3,139 Staff cost (428) (507) (540) (667) (777) CAPEX (2,949) (2,858) (1,856) (2,850) (1,886) Rental cost (370) (456) (521) (597) (702) Proceeds from disposals Other operating expenses (603) (828) (891) (1,007) (1,071) Other investing cash flow (879) 1, (173) (174) Operating pro fit 887 1,054 1,330 1,766 2,166 Investing cash flo w (3,825) (953) (1,762) (3,013) (2,048) Finance income Proceeds from borrowings 1, (1,347) (58) 0 Financial costs (155) (177) (222) (215) (152) Share issue (24) 0 0 Other non-operating expenses Dividends paid (289) (380) (395) (624) (682) P ro fit befo re tax 1,129 1,321 1,656 2,082 2,537 Other financing cash flow (274) (215) (152) Tax expenses (271) (300) (406) (500) (609) F inancing cash flo w 1, (2,040) (897) (834) P ro fit after tax 858 1,020 1,250 1,582 1,928 M inority interests (37) (48) (59) (74) (91) N et change in cash (523) (514) 257 N et pro fit ,192 1,508 1,838 F ree cash flo w 115 (229) 529 (137) 1,397 Basic EPS (RM B) Diluted EPS (RM B) Total DPS (RM B) Key ratio s E 2014E 2015E Revenue growth (%) Operating profit growth (%) B alance sheet (R M B m) E 2014E 2015E Net profit growth (%) Cash and cash equivalents 1,998 2,729 2,296 1,919 2,288 Concessionaire rate (%) Inventories Direct sales gross margin (%) Account receivables 1,505 2,592 2,586 2,970 3,157 Operating margin (%) Other current assets 951 2,395 1, Net margin (%) T o tal current assets 4,749 8,077 6,718 6,010 6,650 ROA (%) Property, plant and equipment 3,074 4,276 5,378 6,436 7,405 ROE (%) Investment properties 1,726 2,545 2,484 2,755 2,916 Net debt to equity (%) Prepaid land lease payments 2,955 2,177 2,783 4,048 4,485 Quick ratio (x) Other non-current assets 4,736 4,218 4,140 4,277 4,377 Current ratio (x) T o tal assets 17,241 21,294 21,503 23,527 25,834 Interest coverage ratio (x) ST borrowings 282 1, ,258 Convertible bonds 0 1, Other current liabilities 5,500 7,852 8,629 9,752 10,813 T o tal current liabilities 5,782 10,648 8,819 9,752 13,072 LT borrowings 1,204 1,012 2,270 3,399 1,141 Convertible bonds 1, Key assumptio ns E 2014E 2015E Guaranteed Bonds Due July Gross sales proceeds (RM Bm) 11,633 13,939 16,249 20,154 23,045 Other non-current liabilities Concessionaire rate (%) T o tal liabilities 9,972 13,119 12,495 13,561 14,623 No. of stores (self-operated) Share capital and reserves 6,528 7,238 8,035 8,919 10,075 Total GFA (sqm) 1,174,777 1,325,159 1,603,579 2,217,579 2,460,579 Equity Component of CB owned GFA/total GFA (%) Shareho lders' equity 6,552 7,262 8,035 8,919 10,075 M inority interests ,046 1,137 T o tal equity & liabilities 17,241 21,294 21,503 23,527 25,834 Basic BPS (RM B)

3 Quarterly Gross Sales Proceeds per Store No. Province Stores Opened OFA (sqm) 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 1 Zhejiang Hangzhou Wulin Nov-98 34, Zhejiang Ningbo Tianyi Apr-05 18, Zhejiang Ningbo Dongmen Nov-05 35, Zhejiang Jinhua Fuhua Jan-07 22, Zhejiang Wenzhou Shimao Feb-07 21, Zhejiang Hangzhou Linping Sep-07 8, Zhejiang Ningbo Yinzhou Sep-07 19, Hubei Wuhan Shiji Jan-08 21, Hubei E'zhou Guomao Apr-08 16, Zhejiang Hangzhou Westlake Apr-08 53, Hubei Xiangyang Jiefang Sep-08 20, Hubei Xianning Xian'an Sep-08 19, Zhejiang Jinhua Jiangnan Sep-08 20, Shaanxi Xi'an Zhonglou Oct-08 29, Zhejiang Zhoushan Lincheng Jan-09 17, Zhejiang Hangzhou Qingchun Apr-09 55, Zhejiang Yiwu Yimei Apr-09 21, Zhejiang Jinhua Intime City Sep-09 56, Zhejiang Ningbo Jiangdong Dec-09 27, Hubei Intime Xiantao Dec-09 41, Zhejiang Hangzhou Fuyang Apr-10 16, Hubei Suizhou New Century Jan-11 80, Hebei Tangshan Xinhua Oct-11 15, Zhejiang Cixi Intime City Dec-11 55, Shaanxi Xi'an Qujiang Intime City Dec-11 39, Beijing Dahongmen Dec-11 23, Anhui Hefei Yintai Centre Jan-12 45, Zhejiang Hangzhou Culture Plaza Jun-12 29, Zhejiang Ningbo Fenghua Sep-12 14, Zhejiang Shaoxing Keqiao Apr-13 35, Shaanxi Xi'an Xiao Zhai Intime City Apr-13 45, Zhejiang Hangzhou Chengxi Intime City Sep-13 24,

4 Quarterly SSSG per Store No. Province Stores Opened OFA (sqm) 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 1 Zhejiang Hangzhou Wulin Nov-98 34, % -2.0% -5.5% -4.7% 5.0% 2.7% 3.8% -7.6% 2 Zhejiang Ningbo Tianyi Apr-05 18, % 5.1% 1.2% -4.8% 3.8% -4.0% 8.3% -5.2% 3 Zhejiang Ningbo Dongmen Nov-05 35, % -3.2% 4.6% -3.3% 3.4% -4.0% 9.9% -2.9% 4 Zhejiang Jinhua Fuhua Jan-07 22, % 24.1% 50.5% 6.1% 94.4% -2.2% 13.8% -14.2% 5 Zhejiang Wenzhou Shimao Feb-07 21, % -7.5% -5.7% -22.5% -6.3% -1.7% -0.9% 9.6% 6 Zhejiang Hangzhou Linping Sep-07 8, % 5.3% 7.5% 15.3% 10.0% 6.7% 54.8% 8.9% 7 Zhejiang Ningbo Yinzhou Sep-07 19, % 15.6% 11.6% 5.8% 17.3% 6.2% 34.9% 11.3% 8 Hubei Wuhan Shiji Jan-08 21, % -14.2% 9.0% -16.8% -6.5% 21.1% 24.7% 59.4% 9 Hubei E'zhou Guomao Apr-08 16, % 28.5% 33.0% 4.8% 8.9% 13.9% 40.9% 18.5% 10 Zhejiang Hangzhou Westlake Apr-08 53, % 12.0% 11.6% 5.7% 5.5% 8.3% 14.6% -3.9% 11 Hubei Xiangyang Jiefang Sep-08 20, % 48.2% 34.0% 22.2% 21.9% 1.7% -9.7% -22.1% 12 Hubei Xianning Xian'an Sep-08 19, % 21.9% 29.0% 11.3% 6.5% 5.6% 6.3% 3.9% 13 Zhejiang Jinhua Jiangnan Sep-08 20, % 28.9% 27.1% 9.4% 109.8% -2.4% 22.7% 9.3% 14 Shaanxi Xi'an Zhonglou Oct-08 29, % 35.3% 23.1% 8.0% 20.2% 5.9% 4.6% 0.9% 15 Zhejiang Zhoushan Lincheng Jan-09 17, % -17.1% -9.9% -21.8% -3.6% 4.7% 16.6% -0.5% 16 Zhejiang Hangzhou Qingchun Apr-09 55, % 18.8% 13.7% 31.7% 30.9% 16.3% 27.8% 1.3% 17 Zhejiang Yiwu Yimei Apr-09 21, % 22.9% 21.6% 28.7% 28.2% 30.2% 37.1% 6.4% 18 Zhejiang Jinhua Intime City Sep-09 56, % 66.7% 84.5% 18.9% 35.9% 18.9% 24.3% 29.4% 19 Zhejiang Ningbo Jiangdong Dec-09 27, % 32.6% 32.3% 20.5% 11.0% 8.5% 19.5% 8.5% 20 Hubei Intime Xiantao Dec-09 41, % 11.4% 21.6% 13.4% 21.5% 16.1% 23.8% 15.6% 21 Zhejiang Hangzhou Fuyang Apr-10 16, % 28.0% 30.7% 22.9% 34.6% 36.9% 41.2% 12.6% 22 Hubei Suizhou New Century Jan-11 80, % 9.7% 22.0% 14.7% -2.7% 4.6% 1.3% 23 Hebei Tangshan Xinhua Oct-11 15, % -8.7% -14.7% 24 Zhejiang Cixi Intime City Dec-11 55, % 40.3% 15.4% 25 Shaanxi Xi'an Qujiang Intime City Dec-11 39, % 68.9% 18.2% 26 Beijing Dahongmen Dec-11 23, % 59.1% 52.9% 27 Anhui Hefei Yintai Centre Jan-12 45, % 201.4% 42.2% 28 Zhejiang Hangzhou Culture Plaza Jun-12 29, % 76.5% 29 Zhejiang Ningbo Fenghua Sep-12 14, % 30 Zhejiang Shaoxing Keqiao Apr-13 35, Shaanxi Xi'an Xiao Zhai Intime City Apr-13 45, Zhejiang Hangzhou Chengxi Intime City Sep-13 24,000 4

5 Key Assumptions Unfavourable weather impacted sales. The first five days of October Golden Week was strong with 8.6% SSSG while the remaining two days saw a decline in GSP. We believe the impact of typhoon Fitow will last for a while due to the following factors: 1) new stores in newly-emerging suburban areas will take more time to ramp-up, as the infrastructure in districts like Chengxi were impacted; and 2) negative retail sentiment due to the damage to properties and durable goods would reduce customer traffic to existing stores. Change is merchandizing SSSG. We lower our SSSG assumption for the whole year by 1ppt to 10.8% for concessionaire and direct sales, mainly on the cut in performance for mature stores, such as Wulin Store. But we expect the concessionaire rate to recover to 17.5% in 2H13E from 17.3% in 1H13, with slower growth in low-margin gold and jewellery sales. We expect direct the sales margin to deteriorate slightly to 2H13E to 11.9% from 12.1%, due to seasonality. Rental income leading the growth. We expect rental income to grow 45% YoY in 2013E, due to increasing contribution from hybrid models. With the opening of Chengxi Intime City in Sep 2013, our previous forecast is still in line. Pipeline Projects No. Province City Store Name Opening time GFA (sqm) Format 1 Zhejiang Huzhou Huzhou Aishan Dec-13 48,000 Lease 2 Hebei Tangshan Tangshan Xinhua Phase 2 Dec-13 80,000 Lease 3 Zhejiang Haining Haining Intime City Jan ,000 Own 4 Anhui Hefei Hefei Intime City Apr-14 84,000 Lease 5 Zhejiang Wenling Wenling Intime City Apr ,000 Own 6 Zhejiang Huzhou Huzhou Dongwu Intime City Apr ,000 Lease 7 Hubei Wuhan Wuhan Wuluo Intime City Apr ,000 Own 8 Guangxi Liuzhou Liuzhou Intime City Jul-14 40,000 Own 9 Zhejiang Hangzhou Hangzhou Zhongda Intime City Sep-14 80,000 Own 10 Zhejiang Wenzhou Wenzhou Leqing Sep-14 40,000 Lease 11 Zhejiang Shaoxing Shaoxing Haiman City Dec ,000 Lease 12 Anhui Wuhu Wuhu Intime City TBD 160,000 Own 13 Inner Mongolia Baotou Baotou Gaoxin TBD 70,000 Lease 14 Zhejiang Taizhou Taizhou Jiaojiang TBD 58,000 Lease 15 Shaanxi Baoji Baoji Intime City TBD 100,000 Lease 16 Anhui Haozhou Haozhou Hualun TBD 40,000 Own 17 Hubei Xiaogan Xiaogan Intime City TBD 80,000 Lease 5

6 Comparable Valuation Table Company Ticker Price 52-Wk Mkt 3m Avg PER Dividends Yield Low/High Cap Turnover E 2014E E 2014E (HK$) (HK$) (US$m) (US$m) (x) (x) (x) (%) (%) (%) GOLDEN EAGLE 3308 HK / , PARKSON RETAIL 3368 HK / , INTIME DEPT 1833 HK / , NEW WORLD DEPT* 0825 HK / MAOYE INTL 0848 HK / , SPRINGLAND INTL 1700 HK / , LIFESTYLE INTL 1212 HK / , Simple Avg Mkt Cap Avg Company Ticker 2013 PEG PBR ROE Net Debt/Equity ( CAGR) E 2014E E 2014E E 2014E (x) (x) (x) (x) (%) (%) (%) (%) (%) (%) GOLDEN EAGLE 3308 HK PARKSON RETAIL 3368 HK Net Cash Net Cash Net Cash INTIME DEPT 1833 HK NEW WORLD DEPT* 0825 HK Net Cash Net Cash Net Cash MAOYE INTL 0848 HK SPRINGLAND INTL 1700 HK Net Cash Net Cash Net Cash LIFESTYLE INTL 1212 HK Net Cash 0.35 Net Cash Simple Avg Mkt Cap Avg Source: Company, Bloomberg, CGIHK Research Updated as of October 11, 2013 * Latest financial year end in June Presented figures are after adjusting year end as of calendar year Share Price Performance 20% 10% 0% -10% -20% -30% -40% -50% -60% Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Golden Eagle Parkson Intime Maoye NWDS Springland Lifestyle Source: Bloomberg, CGIHK Research 6

7 % RMBm Key Valuation Metrics Figure 1: Revenue/Operating profit/net profit 8,000 7,000 6,000 5,000 4,000 Figure 2: Store Breakdown 100% % 80% 70% 13 60% 19 50% ,000 2,000 1,000 Figure 3: Margins Figure 5: PER band E 2014E 2015E Revenue Operating profit Net profit FY2011 FY2012 FY2013E FY2014E FY2015E Concessionaire rate (%) Direct sales gross margin (%) Operating margin (%) Net margin (%) 40% 30% 20% 10% 0% 12 Figure 4: Operating Expenses Breakdown 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FY2011 FY2012 FY2013E FY2014E FY2015E Depreciation and amortisation Staff cost Rental cost Other operating expenses 25 Figure 6: PBR band FY2011 FY2012 FY2013E FY2014E FY2015E Less than 3 years 3-8 years More than 8 years Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Share price 6.0x 12.0x 18.0x 24.0x Source: Company, Bloomberg, CGIHK Research 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Share price.7x 1.5x 2.3x 3.1x Source: Company, Bloomberg, CGIHK Research 7

8 Analyst Certification The research analyst who is primarily responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject, securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by the analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report three business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. Explanation on Equity Ratings BUY: We expect the total return on the stock to exceed 20% over a 12 to 18 month horizon. HOLD: We expect the total return on the stock will be between 0% to 20% over a 12 to 18 month horizon. SELL: We expect the total return on the stock will be less than 0% over a 12 to 18 month horizon. DISCLAIMER For private perusal only. This report (including any information attached) is issued by China Galaxy International Securities (Hong Kong) Co., Limited, one of the subsidiaries of the China Galaxy International Financial Holdings Limited, to individual addressee whether they are professional investor, institutional client or otherwise, in good faith from sources believed to be reliable but no representation or warranty (expressly or implied) is made as to their accuracy, correctness and/or completeness. Where any part of the information, opinions or estimates contained herein reflects the personal views and opinions of the analyst who prepared this report, such views and opinions may not correspond to the published view of China Galaxy International Financial Holdings Limited and any of its subsidiaries. This report shall not be construed as an offer, invitation or solicitation to buy or sell any securities of the company or companies referred to herein. All opinions and estimates reflect the judgment of the analyst on the date of this report and are subject to change without notice. Please take note that member companies of China Galaxy International Financial Holdings Limited (including but not limited to China Galaxy International Securities (Hong Kong) Co., Ltd) and/or their directors, officers, agents and employees ( the Relevant Parties ) may have an interest in securities of the company or companies referred to in this report. The Relevant Parties hereby disclaim any of their liabilities arising from the inaccuracy, incorrectness and incompleteness of this report and its attachment(s) and/or any action or omission made in reliance thereof. Accordingly, this report must be read in conjunction with this disclaimer. COPYRIGHT RESERVED China Galaxy International Securities (Hong Kong) Co. Limited, CE No.AXM459, Room , 35/F, Cosco Tower, Grand Millennium Plaza, 183 Queen s Road Central, Sheung Wan, Hong Kong. General line: