Siam Makro (MAKRO) reported
worse-than-expected 4Q02 results on Friday. Excluding an
extraordinary gain of Bt12mn, MAKRO's normalised 4Q02 profit
of Bt184mn, slipped 12% qoq and 16% yoy. Gross margins fell
from 7.04% in 4Q01 to 5.66% on the back of increasing
competition as well as declining portion of non-food sales.
MAKRO's full-year 2002
earnings dropped 4% even with an extraordinary profit from
selling its subsidiary, Makro Auto Care (MAX). Without this
gain, normalised earnings fell 18% to Bt805mn due to
narrowing margins and lower sales after selling off MAX.
The company's prospects
remain poor given its very narrow margins and the fact that
MAKRO isn't expanding its branches as aggressively as other
discount stores. We aren't quite convinced that MAKRO's
margins will widen back again with its pure wholesaling
strategy and members-only restriction.
MAKRO does have a strong
financial position, however, with net cash of Bt4,720mn or
Bt20/share. The company announced that it will pay a big
dividend of Bt3.50/share, representing 10% yield at the
current share price. The company had already paid a
Bt3.0/share extra dividend in July 2002 from the gain from
divestment of MAX.
Even with the attractive
dividend yield, we are maintaining our SELL
recommendation on MAKRO as we believe its share price has
already reflected the dividend payout and should fall by the
same amount once the stock goes XD.
