The share price of Siam Global House Public Company Limited (GLOBAL) edged 6.54% higher to close at ฿22.80/share as of the closing bell on Monday, July 5, 2021, with a trading value of 644 million baht.
KGI maintains a rating of Outperform on GLOBAL with an end-2022 target price of 27.00 baht based on PER 38.0x, expecting solid earnings growth of 44% in 2021 and maintaining 2021-2022 earnings forecasts as i) front-end load pattern on its earnings, and ii) less benefit to profitability from steel price, which KGI have taken into account in the forecast.
GLOBAL is foreseen to announce 2Q21 earnings of 894 million baht (+76% YoY, 7% QoQ), putting its 1H21 earnings at 1.9 billion baht (+66% YoY), accounting for 63% of KGI’s full-year forecast. Growth YoY would be from the low base last year, while the decline QoQ would be due to less benefit from rising steel price.
KGI forecast 2Q21 sales to reach 8.7 billion baht (+39% YoY, +0.2% QoQ) which would put its 1H21 sales at 17.4 billion baht (+29% YoY). The company’s 2Q21 SSSG is expected to reach 35% (vs 20% in 2Q20, 13.7% in 1Q21, and 10% for KGI 2021 assumption) which would be mainly due to low base from the temporary store closures last year. KGI expects the company to launch one new store in the quarter, bringing it to a total of 74 stores.
Meanwhile, gross margin is expected to reach 25.2% (+1.4ppts YoY, 0.2ppts QoQ) in 2Q21 due to GLOBAL’s house brand strategy and the rising steel price. This implies a 1H21 gross margin of 25.3% (+1.4ppts YoY) compared to KGI 2021 assumption of 24.8%. The SG&A to sales ratio should be 13.5% in 2Q21 (vs 16.0% in 2Q20 and 12.9% in 1Q21), reflecting expenses related to the new store.