Shanghai Bailian Group:SOE reform proceeding slowly;lowering earnings forecast发布时间：2016-06-20 研究机构：瑞银证券
Disneyland benefits have yet to materialize; lowering earnings forecast
Revenue fell 5.3% YoY in 2015, dragged by declines in revenue and sales per squaremeter at its department stores, convenience stores and large supermarkets. Preexceptionals(pre-x), net profit attributable to the parent fell 10.3% YoY in 2015. Q116revenue dipped 2.1% YoY, with pre-x net profit falling 6.3% YoY. The results missedour estimates. We expect the company to benefit from an influx in visitors to Shanghaifollowing Disneyland's launch. However, due to the resort launching later than weexpected (early 2016), the sales boost will be pushed into the future. That, along withsoft demand, e-commerce pressure, mass store closings in eastern China and a delayedearnings contribution from new outlet malls, causes us to lower our 2016-18E revenueto Rmb49.6/51.5/52.6bn from Rmb50.1/51.6/52.8bn.
Limited efficiency gains from SOE reform; raising expense ratio estimates
Advertising and rental expenses both rose in 2015 compared with the prior year, withnew store openings as the main culprit. Considering factors such as increasing rentsand labour costs, along with the absence of any meaningful boost from SOE reform,we are slightly raising our 2016-18E administrative expense ratio to 4.25%/4.22%/4.21% from 4.2%/4.2%/4.2% and our 2016-18E selling expense ratio to 14.80%/14.63%/14.60% from 14.75%/14.60%/14.50%.
Inorganic expansion to drive top-line growth
On 14 June 2016, the company announced that it completed acquisitions of a 49%stake in Shanghai Bailian Zhonghuan and a 51% stake in Bailian Chongming ShoppingCenter from its parent company, with the assets to be paid for via a private placementof shares. Bailian Zhonghuan is a mature property, whereas Bailian ChongmingShopping Center is newly opened. We believe the company's top-line growth is set tobenefit from inorganic expansion.
Valuation: Lowering price target and earning forecast; maintain Buy
We are lowering our 2016/17/18E EPS to Rmb0.64/0.72/0.76 from Rmb0.71/0.79/0.84.
As a result, our DCF-derived price target falls to Rmb19.5 from Rmb21.6 (WACC8.1%). We maintain our Buy rating.