SEM (5250) - 7-Eleven Malaysia Holdings Berhad - 100% dividend payout
Target RM1.70 (Stock Rating: ADD)
FY14 core net profit came in below our forecast (91% of FY14 forecast) and consensus (90%) due to lower-than-expected top line and interest expense. Revenue increased due to a wider network and stronger SSS growth, while net profit increased largely due to the higher other operating income. We cut our FY15-16 earnings forecasts and target price, based on an unchanged P/E of 23.6x CY16 (20% premium over its peers’ average). Despite the cut in its earnings, growth remains above the sector’s average. We maintain our Add call. It declared an interim DPS of 2.5 sen and a special DPS of 2.6 sen, representing a ~100% dividend payout, and beat our forecast of 1.44 sen. Strong earnings growth and potentially high dividend payout going forward could be rerating catalysts.
Stronger FY14 performance
7-Eleven’s FY14 revenue increased by 13.2% while core net profit (excluding a RM3.8m write-back for part of the provision for rental in the Shell case and RM2.3m due to over provision of listing expenses) increased by 29.3% yoy. The stronger revenue was driven by same-store-sales growth of 4.5% and growth in the number of stores from 1,557 in FY13 to 1,745 in FY14. EBITDA margin increased 0.8% pts yoy due to higher selling prices, a better product mix, higher operating income (excluding interest income) and lower administrative and other operating expenses which offset the higher selling and distribution expenses due to higher staff cost for store expansion and higher utilities cost, resulting in higher net profit yoy.
4Q net profit jumped 71%
In terms of 4QFY14 vs. 4QFY13, revenue increased by 14% yoy due to the opening of new stores, higher average selling prices, a better product mix and consumer promotional activity. Core net profit jumped 71.1% yoy due to the (1) expansion in gross profit margin, (2) higher other operating income, (3) lower administrative and other operating expenses as a percentage of sales and (4) lower effective tax rate.
Cut EPS forecasts but increase dividend payout
We reduce our FY15-16 earnings forecast by 5-7%, factoring in lower top line and higher interest expense. While we increase our dividend payout assumption to 60%, there could be more dividend upside.
Source: CIMB Daybreak - 02 March 2015
Target RM1.70 (Stock Rating: ADD)
FY14 core net profit came in below our forecast (91% of FY14 forecast) and consensus (90%) due to lower-than-expected top line and interest expense. Revenue increased due to a wider network and stronger SSS growth, while net profit increased largely due to the higher other operating income. We cut our FY15-16 earnings forecasts and target price, based on an unchanged P/E of 23.6x CY16 (20% premium over its peers’ average). Despite the cut in its earnings, growth remains above the sector’s average. We maintain our Add call. It declared an interim DPS of 2.5 sen and a special DPS of 2.6 sen, representing a ~100% dividend payout, and beat our forecast of 1.44 sen. Strong earnings growth and potentially high dividend payout going forward could be rerating catalysts.
Stronger FY14 performance
7-Eleven’s FY14 revenue increased by 13.2% while core net profit (excluding a RM3.8m write-back for part of the provision for rental in the Shell case and RM2.3m due to over provision of listing expenses) increased by 29.3% yoy. The stronger revenue was driven by same-store-sales growth of 4.5% and growth in the number of stores from 1,557 in FY13 to 1,745 in FY14. EBITDA margin increased 0.8% pts yoy due to higher selling prices, a better product mix, higher operating income (excluding interest income) and lower administrative and other operating expenses which offset the higher selling and distribution expenses due to higher staff cost for store expansion and higher utilities cost, resulting in higher net profit yoy.
4Q net profit jumped 71%
In terms of 4QFY14 vs. 4QFY13, revenue increased by 14% yoy due to the opening of new stores, higher average selling prices, a better product mix and consumer promotional activity. Core net profit jumped 71.1% yoy due to the (1) expansion in gross profit margin, (2) higher other operating income, (3) lower administrative and other operating expenses as a percentage of sales and (4) lower effective tax rate.
Cut EPS forecasts but increase dividend payout
We reduce our FY15-16 earnings forecast by 5-7%, factoring in lower top line and higher interest expense. While we increase our dividend payout assumption to 60%, there could be more dividend upside.
Source: CIMB Daybreak - 02 March 2015
