Mr. Bunchai Punturaumporn, Managing Director of Sabina Public Company Limited (SABINA), stated that the government’s “Shop Dee Mee Kuen” (Shop and Payback) scheme which allows purchasers to file for tax reduction later will give a great boost in Thai’s expenditure at year end, and expected products from SABINA to receive good response from consumers.
Maybank Kim Eng has given a “BUY” recommendation on SABINA with a target price at ฿24.30/share, expecting the company to benefit from the Shop Dee Mee Kuen and 11.11 and 12.12 online campaigns.
Maybank expected SABINA’s earnings to drop 39% YoY on the back of a 3Q19 high profit base (high record), but should recover 41% QoQ to THB71m. After the lockdown eased, sales recovered by 90% of normal sales. The security company expected in-store sales to recover 37% QoQ, but still down 16% YoY, while Non-Store Retailing (NSR) sales slow QoQ but grow by 54% YoY.
Maybank estimated a gross margin of 49.4%, recovering from 38.8% in 2Q20 due to an increase in capacity utilisation and not producing donated fabric masks like 2Q20. Staff costs tend to decline due to a drop of around 500 employees YTD (11% of total employees).
Moving on in 4Q20, SABINA’s profit is expected to continue to recover, benefiting from the Shop Dee Me Kuen programme, including the 11.11 and 12.12 online campaigns. Maybank pointed out that last year SABINA was the top-selling brand of fashion groups sold on Lazada and Shopee. OEM sales tend to increase as the customers postpone deliveries from 2Q20 to Sep-Dec.
Maybank expected SABINA’s profit to grow 41% in 2021, benefiting from the recovery of both in-store sales and NSR. Margins should improve from the higher utilisation rate and increased import products. In addition, employee expenses will decrease by THB30m/year.
According to Maybank, it believed the lockdowns and digital disruption provide an opportunity for SABINA to do asset light business. The company has more focus on NSR sales, reducing the number of stores, eliminating large inventory and lower rent expenses. While the number of employees decreased both in factories and in stores, the company can import more products without expanding its own production capacity, resulting in low CAPEX less than THB10m/year. The net debt-to-equity ratio is estimated at only 0.1x. Maybank expected the dividend pay-out ratio of 100%, implying a 4-5% yield.
Nevertheless, the second wave of COVID-19 epidemic, slow economy, higher production costs, and problems with imports of products from China could be the risk to SABINA’s upside.