BigC Supercenter's (BIGC)
4Q02 results reported yesterday beat expectations. The
company announced surprisingly strong net profit growth of
60% qoq and 44% yoy to Bt434mn, bringing full-year earnings
to Bt1,288mn.
Sales growth in 4Q02 was
partly due to seasonal factors, a recovery in consumer
spending as well as one new store opened at Tiwanon.
However, gross margins still narrowed slightly to 9.35% due
to increasing competition in the retail industry.
For the full-year 2002, BIGC
achieved sales growth of 17% from the opening of four new
branches at Bangna, Ladprao, Daokanong and Tiwanon.
Additional financing for the branch expansion resulted in
interest expenses rising by 66%. On the other hand, BIGC's
effective tax rate last year fell from 18.7% to 16.1% as a
result of losses on the liquidation of BIGC's wholly-owned
subsidiaries, Siam Retail and Asia Asset during mid-2001.
The Bt396mn write-off was transferred to tax savings.
Although BIGC has
concentrated on branch expansion, the company's financial
status remains quite healthy with net debt-to-equity ratio
of only 0.28x, down slightly from 0.30x in 2001. BIGC
generated operating cash flow of Bt3,453mn or Bt4.3/share.
BIGC's retained earnings
turned from loss of Bt843mn in 2001 to retained profit of
Bt421mn, allowing the company to resume paying dividend this
year or next year. The company hasn't paid a dividend since
the start of the Asian economic crisis five years ago.
With BIGC's shares falling to
a new two-year low yesterday, the market clearly hasn't yet
reflected BIGC's 2002 results or its growth potential from
branch expansion and improving economy, strong cash flow and
solid financial position.
Based on the company's 4Q02
performance, our 2003 earnings forecast now appears to be on
the conservative side. However, based on these projections,
BIGC is trading on 2003 PER of only 8.8x. With an 85% upside
potential to our target price of Bt27, we are reiterating
our BUY rating on BIGC.
