{"id":325558,"date":"2023-11-02T13:34:21","date_gmt":"2023-11-02T05:34:21","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325558"},"modified":"2023-11-02T13:34:23","modified_gmt":"2023-11-02T05:34:23","slug":"stock-in-focus-robinsons-retail-holdings-inc-rrhi-3-nov-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-robinsons-retail-holdings-inc-rrhi-3-nov-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Robinsons Retail Holdings Inc. (RRHI) – 3 Nov 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>RRHI<\/td><\/tr>
Company Name<\/strong><\/td>Robinsons Retail Holdings Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>3 Nov 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 75.22<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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The macro backdrop is likely to keep sentiment on the stock sour. With that being said, however, we note that the stock is still far too undervalued, with P\/E levels already below what we saw during the peak of the lockdown. Additionally, we note that prices in the market may not reflect the 6.8% stake that the company will own in BPI by next year. As such, RRHI remains a bargain BUY for patient investors who are willing to ride out the ongoing uncertainties.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Upon excluding non-core items such as interest expenses from the BPI-related debt, along with forex gains\/losses and share in associate\u2019s earnings, RRHI\u2019s bottomline performed within consensus\u2019 expectations, accounting for 67.7% of the full-year figures. While Q3\u2019s core bottomline was down on a year-on-year (YoY) basis mostly due to inflationary woes, we note that sequential growth in operating performance was a welcome surprise. Nevertheless, with high risks of second-round inflation, it may be challenging for the company to continue building upon thismomentum.<\/p>\n\n\n\n

Topline growth slows in Q3, hand-in-hand with supermarket. 9-months (9M) 2023 net sales grew by 8.7%, mostly tracking the 8.9% expansion that was witnessed by the supermarket segment, RRHI\u2019s largest revenue generator. Continued store openings provided the bulk of the growth for 9M as systemwide SSSG (down to 5.0% from 11.8%) continued to normalize following the fading of the reopening boom and the high base from last year\u2019s election-related spending. <\/p>\n\n\n\n

We note though that Q3 sales growth lagged 9M at only 5.6%, once again following the lead of the supermarket segment which saw sales expansion dip to 5.2%, mainly due to flat SSSG of only 1.8%, as higher costs of living impacted consumers\u2019 spending habits. <\/p>\n\n\n\n

Drugstores proved to be the best performing retail format, with 9M and Q3 topline accelerating by 12.8% and 8.4% respectively. This can be chalked up to the higher store count and continued demand for prescription medicine. Department stores also provided another bright spot, with SSSG continuing to trend in the high single digits despite last year\u2019s high base.<\/p>\n\n\n\n

Margin pressures continue to sting. As expected however, inflation-driven cost effects continued to bear down on RRHI. While the company still managed to secure its GPM due to its strong ability to raise prices, higher overhead costs continued to permeate. This is especially true for a retailer such as RRHI whose strategy relies primarily on setting up as many stores as possible. <\/p>\n\n\n\n

EBITDA and operating margins were down across the board, with Q3 seeing declines of 40bps and 30bps apiece. The 30bps weakening in operating margins was the main reason behind the company\u2019s 5.2% YoY decline in core earnings for the quarter. The convenience store segment was the primary culprit behind this, as it lost over 4ppts worth of EBITDA margins in Q3.<\/p>\n\n\n\n

Nevertheless, with inflation threats in full bloom along with the potential impact of the recent off-cycle rate hike on consumer spending, we note that it will be very challenging to build off of this burst of momentum.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>