银泰百货分析

Hong Kong: Retail / Consumer Goods Action

BUY (Initiation)

TP upside (downside) 19.4% Close 15 June, 2009

Price

12M Target

Previous Target Hang Seng Index

HK$3.60 HK$4.30 N.A.

18,889.7

Our view

Initiation

16 June, 2009

What’s new?

We initiate coverage of Intime

Department Store with a BUY price of HK$4.3.

rating and a 12-month target

Our EPS projections are higher

than consensus as 1) we have higher same-store-sale forecasts; and 2) we expect the in 2H09.

economy in Zhejiang to rebound

Company profile: Intime is a department store chain with 19 stores in China. The company has a strong regional presence in the Zhejiang province.

Share price performance relative to Hang Seng Index

6.05.55.04.54.03.53.02.52.01.51.0

Jun-08

Sep-08

Dec-08

Mar-09

Share Price (HK$)

Performance relative to Hang Seng Index (%)

Entrenched position leads to value

-2-7-12-17-22-27-32-37-42-47

We initiate coverage of Intime with a BUY rating: We have a BUY

recommendation on Intime given 1) its dominant market position, a result of its prime locations; 2) the company changing its primary focus from expansion to profitability; and 3) future growth in tier-two and -three cities. We expect Intime to post 19.1% EPS CAGR in 2008-11, driven by revenue CAGR of 28.7% over the same period. We derive our target price of HK$4.3, which implies 15x our 2010F P/E, from the average of our DCF and EV/EBITDA valuations.

Intime’s cash flow is better than market expectations: The

management has adjusted its cash flow strategy by restructuring its assets and slowing down its large-scale projects to deal with the difficult economic environment over the past twelve months. Moreover, as China’s central bank has implemented a credit easing credit financing from banks, thus easing market concerns. New management paying more attention to profitability than rapid

expansion: The new CEO, who was appointed in January 2009, has focused on strengthening the company’s brand mix and promotional activity at existing stores to improve profitability. Dominant position in Zhejiang, the wealthiest province in China: In

our view, Intime has acquired prime locations for department stores in the major cities in Zhejiang province. As such, the company has effectively curtailed its competitors from opening any new stores there. Intime currently runs 19 department stores in China with 13 stores in the Zhejiang province.

Risks to our BUY rating include 1) worse-than-expected consumer spending; 2) unexpected credit tightening; and 3) a lack of experienced personnel, which would affect store performances.

Market cap

6M avg. daily turnover Outstanding shares Free float

Major shareholders Net debt/equity BVPS (2009F) P/B (2009F)

Financial outlook (RMB mn) Year to Dec Sales Op. profit Net profit EPS (RMB) EPS growth (%) DPS (RMB) P/E (X) Div. yield (%)

US$813.0 mn US$0.9 mn 1,750.2 mn

55.7%

Guojun Shen,

44.2% 10.7% RMB2.02

1.6x

policy in 2009, we believe Intime should be able to obtain sufficient

2008

1,233 307 384 0.21 (4.5) 0.07 15.1 2.1 9.9

2009F

1,736 409 338 0.19 (8.0) 0.06 16.4 1.7 8.8

2010F

2,1055114300.2527.30.0812.92.510.4

2011F

2,630 718 621 0.35 44.4 0.11 8.9 3.5 13.6

ROE (%)

Luke Qian

+ 86 21 5239 8999

lukeqian@http://www.wendangwang.com

Charles Z. Yan, CFA +852 3969 9530

charles.yan@http://www.wendangwang.com

ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES BEGIN ON PAGE 41.

Yuanta does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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