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Fully Valued
Current Price
S$1.55
Fair Value
Up / (downside)
S$1.30
(16%)
Initiate coverage with a fair value of S$1.30, based on 19x FY13 PER, in
line with its regional peer comparison. Though we like its' business model
with good cash flow generation, low capex and working capital requirement,
the near to mid-term valuation is not compelling and we initiate coverage
with Fully Valued recommendation. We see that its true value will only be
unlocked in FY14 when its road map is successfully launched next year.
Given the group is still focusing on expansion, no dividend projected for the
time being.
Build it and they will come. Zhongmin Baihui owns and operates two
department stores in Xiamen City and one in Nanjing as well as manages
six other department stores owned by Quanzhou ZMBH under the groups
brand name. It plans to open three more stores in 2013 in Fujian province.
Good location of first self-owned store. The first Xiamen store is located
in the commercial centre of Xiamen City and situated at a transportation hub
servicing bus terminals and high speed train terminals, making it easily
accessible to customers. This successful store is expected to provide a
steady free cash flow of approximately Rmb20m per year for the group.
Something for everyone. The groups stores aim to offer customers a wide
range of products and services to allow convenience, all in one place. The
Xiamen store targets consumers in the middle to high level income
brackets.
Chinese spending power set to grow in the long-term but might face
challenges in the coming years. Chinas shift to boost local consumption
amidst falling exports to the troubled Eurozone and slow recovery in the US
bodes well for the local retail industry. According to Business Monitor
International (BMI), Chinas retail sales are set to reach US$3.8bn in 2016,
which would translate into a CAGR of 10% beginning 2009 to 2016.
Stock Statistics
Market cap
52-low
52-high
Avg daily vol
No of share
Free float
S$301.9m
S$1.40
S$1.57
75,082
196.32m
15%
Key Indicators
ROE 12F
ROA 12F
P/BK
Net gearing
42%
19%
19.4
Net Cash
Major Shareholders
Lee Swee Keng
Chen Kaitong
Su Caiye
Low Chui Heng
Lim Kok Tong
Historical Chart
Source: Bloomberg
Jacky Lee
(+65) 6236-6887
jacky.lee@nracapital.com
www.nracapital.com
25.4%
23.7%
11.9%
11.1%
9.7%
Initiating Coverage
07 November 2012
2010
80.9
45.2
(7.1)
(4.3)
(94.6)
nm
5.0
0.0
0.0
2011
217.5
95.2
16.2
8.3
295.5
94.9
34.9
0.0
0.0
2012F
304.3
143.0
25.5
13.0
56.1
60.8
47.5
0.0
0.0
2013F
550.8
258.9
68.7
35.0
169.4
22.6
82.5
0.0
0.0
2014F
726.9
341.6
84.3
42.9
22.6
18.4
125.5
0.0
0.0
Source: Company
page 2
Operation
started /
expected to
start
Location
Self-owned stores
Xiamen Wucun Store
()
309,000
Dec-09
251,000
Oct-11
361,000
Sep-12
Nanjing Nanzhan Store is near to the Nanjing Railway Station which is the
biggest train station in Asia.
68,000
1Q/2013*
471,000
2Q/2013*
Zhangzhou Longwen Store is next to the CBD area and the municipal
government of Zhangzhou City, surrounded by residential buildings and
schools.
172,000
4Q/2013*
Total space sq ft
1,632,000
Managed stores
69,000
1997
Anxi Store spans across five floors of a shopping mall on Jiefang Road, the
commercial centre of Anxi County with high and constant pedestrian flow
and high visibility.
178,000
1999
Tumen Store spans across four floors and a basement, at Tumen Street,
one of the busy shopping belts in the city centre of Quanzhou City.
43,000
2003
120,000
2003
115,000
2006
117,000
2009
Huian Store spans across three floors of a building at the heart of Huian
county with high and constant pedestrian flow and high visibility, and within
the residential areas.
Total space sq ft
642,000
Source: Company
* expected to be operating
page 3
Direct Sales
Concessionaire Sales
17%
Rental Income
63%
Managed Rental
Source: Company
Direct sales is the sourcing and selling of its own products. These products mostly
include products sold in the supermarket and electrical appliances sections of its
department store. Direct sales gives the group better control over the range of
products being offered at its stores.
Concessionaire sales involve entering into agreements with a third party to occupy
designated areas in the groups department. The third party will establish their own
sales counters and products are mostly for jewellery, cosmetics, apparel, garments,
footwear, suitcases and small electrical appliances. A commission of between 18%
and 35% of revenue is charged to the concessionaires.
Rental is basically entering into a lease agreement for certain areas in the
department store at a fixed rental rate for a period of one to five years. Most of these
leases are F & B outlets, cafes, telecommunication companies and certain apparel
stores.
Managed rental is essentially leasing of designated areas in the department store
mostly to apparel stores, with the addition of management fee, which include cash
collection, staff management and payroll service. The group has managed to attract
international and local brands to its Xiamen store such Adidas, Nike, Bossini, Baleno
for apparel and Sony Digital, Panasonic, Phillips, Toshiba, Haier, Midea for
household and electrical goods. Some F&B outlets include Breadtalk, Dicos, Bee
Cheng Hiang and Kang Shi Fu.
In additional, the group collects RMB1m per annum for managing each of Quanzhou
ZMBHs stores as well as earns advertising and promotion fees through charging
organisers and sponsors of promotional programmers advertising and promotion fees
for activities held in its department store.
page 4
Source: Company
page 5
page 6
2010
2011
Jul-12
Aug-12
Sep-12
Communication appliances
22%
28%
26%
28%
25%
Furniture
37%
33%
26%
26%
31%
32%
30%
26%
24%
27%
25%
24%
18%
21%
20%
Cosmetics
17%
19%
15%
18%
16%
25%
24%
18%
18%
16%
25%
25%
17%
17%
19%
Jewellery
46%
42%
14%
15%
13%
28%
28%
9%
12%
14%
Auto
35%
15%
5%
2%
2%
Fujian province ranked 9th richest province in terms of GDP per capita according
to data compiled by Global Demographics, with Beijing, Shanghai and Tianjin taking
top spots. In line with most major coastal cities who have benefited from the countrys
rapid growth due to their proximity to international trade, the rise in discretionary
spending in these cities have attracted both local and international retailers wishing to
cater to the growing middle and higher income bracket consumers. In 2011, Fujian's
nominal GDP was Rmb1.74 trillion (US$276.3bn), a rise of 13% from the previous
year. It's GDP per capita was Rmb46,802 (US$7,246). By 2015 Fujian expects to
have at least 50 enterprises that have over Rmb10bn in annual revenues. The
government also expects 55% of GDP growth to come from the industrial sector.
Map
Name
Administrative Seat
Population (2010)
Sub-provincial city
2
Xiamen
Siming District
3,531,347
Prefecture-level city
1
Fuzhou
Gulou District
7,115,370
Longyan
Xinluo District
2,559,545
Nanping
Yanping District
2,645,549
Ningde
Jiaocheng District
2,821,996
Putian
Chengxiang District
2,778,508
Quanzhou
Fengze District
8,128,530
Sanming
Sanyuan District
2,503,388
Zhangzhou
Xiangcheng District
4,809,983
Total
36,894,216
page 7
2010
2011e
2012f
2013f
2014f
2015f
2016f
Source: BMI
page 8
page 9
page 10
page 11
1H12
1H11
130.4
(114.8)
15.6
11.9
(1.1)
14.5
(0.1)
3.2
(0.2)
0.0
17.4
(5.1)
29.5
0.0
12.3
6.3
94.3
(84.3)
10.0
10.6
(0.8)
9.2
(0.3)
4.3
0.0
0.0
13.2
(4.7)
35.7
0.0
8.5
4.4
yoy %
chg
38
36
56
37
57
(75)
(24)
nm
0
32
9
0
45
42
2H11
123.2
(113.3)
9.9
8.0
(0.8)
9.0
(0.3)
2.9
(0.2)
0.0
11.5
(3.8)
32.6
0.0
7.7
4.0
qoq %
chg
6
1
57
25
60
(70)
13
53
0
52
37
0
59
57
Expect record-breaking year in revenue for FY12. The groups sales jumped 38%
yoy to Rmb130.4m in 1H12 as growth came from all business segments, especially
continuous improvement from its flagship Wucun Store and contributions from its
newly opened Jiahe Store. Given it successfully opened its Nanjing Nanzhan store in
September this year, coupled with riding on the expansion of China domestic
consumption and 3 more new stores expects to open in FY13, we project CAGR
revenue growth of 49.5% over the next three years.
Segmental breakdown revenue by assumption
Self-owned stores
Start
Sq ft
Dec-09
309,000
Oct-11
251,000
2010
2011
2012F
2013F
2014F
154,500
309,000
309,000
309,000
309,000
62,750
251,000
251,000
251,000
90,250
361,000
361,000
Sep-12
361,000
1Q/2013
68,000
51,000
68,000
2Q/2013
471,000
235,500
471,000
4Q/2013
172,000
Total space sq ft
154,500
43,000
172,000
371,750
650,250
1,250,500
1,632,000
141%
75%
92%
31%
Assumption
Direct sale per sf (Rmb)
253
366
274
247
252
115
99
82
82
82
49
82
73
73
73
107
38
38
38
38
(19)
(11)
(9)
(8)
(8)
page 12
Managed rental
Rental income
Direct sales
62
120
600
47
500
400
103
300
25
48
53
14
31
37
200
100
0
134
92
0
2009
411
309
17
8
18
39
136
178
2010
2011
2012F
2013F
2014F
50%
120
EBITDA
40%
100
30%
80
20%
60
10%
40
0%
20
-10%
-20%
(20)
-30%
2010
2011
2012F
2013F
2014F
Good cash flow business model. Zhongmin Baihui generated positive free cash
flow in 2010 and 2011 despite making losses in 2010. The group has an aggressive
road map to open another 3 to 4 stores in FY13. As we estimate each store to cost an
average of Rmb20m, this should not be a problem with the group's zero gearing and
Rmb98.6m net cash position as at end Jun-2012. Management is proud to share that
the six managed stores and two self-owned stores managed to achieve a return on
investment within 1 to 2 years.
page 13
page 14
ZBR SP
6808 HK
BIGC TB
3308 HK
MAKRO TB
601933 CH
3368 HK
1833 HK
1025 HK
900923 CH
ROBINS TB
PKS MK
600694 CH
002419 CH
600729 CH
1700 HK
848 HK
MAPI IJ
601010 CH
000501 CH
980 HK
000417 CH
002277 CH
600723 CH
RALS IJ
600280 CH
000987 CH
002561 CH
600778 CH
000516 CH
600361 CH
002264 CH
600785 CH
600682 CH
600828 CH
331 HK
002187 CH
603123 CH
000564 CH
000679 CH
000889 CH
000715 CH
000785 CH
Price
(Local)
1.55
10.84
186.50
18.72
472.00
25.52
6.94
9.56
14.02
1.12
61.75
5.26
35.20
11.53
24.68
3.99
1.60
6200.00
13.10
11.79
6.41
6.80
9.49
7.99
1120.00
33.17
11.50
8.73
11.18
4.84
5.02
5.86
14.67
8.38
4.81
0.78
7.65
8.40
4.97
6.45
5.63
5.95
6.34
MktCap
(S$ m)
304.3
16329.2
6115.5
5713.3
4502.5
3840.2
3079.9
3022.0
2836.5
2795.0
2726.0
2299.2
2026.0
1808.0
1804.4
1575.1
1356.8
1308.3
1265.1
1171.9
1133.2
1039.2
1039.0
1030.9
1010.3
933.0
808.9
711.3
682.4
676.6
655.0
621.8
596.3
588.4
537.7
518.6
513.3
507.0
461.0
450.5
373.7
325.3
312.1
1893.1
Actual
PER
(x)
94.9
38.5
22.6
24.1
38.0
50.4
14.9
17.3
24.9
6.3
39.8
15.2
13.1
17.5
13.8
12.7
8.7
25.4
14.8
16.7
10.1
11.7
14.6
13.7
18.9
76.0
11.5
13.9
16.7
28.1
75.2
20.6
11.5
17.3
17.2
12.0
13.6
12.2
25.9
19.5
22.4
15.4
31.0
23.7
Y1
PER
(x)
60.8
34.7
24.8
23.5
31.8
38.8
14.7
17.3
22.5
9.6
31.9
13.6
11.2
14.7
12.9
12.6
9.3
23.0
13.2
15.9
10.1
11.6
12.7
13.0
17.6
28.2
10.0
14.7
16.4
20.9
38.6
17.3
10.4
16.7
14.0
7.9
10.5
na
26.2
10.6
23.5
13.3
27.6
19.2
Y2
PER
(x)
22.6
29.0
20.8
19.9
26.7
29.4
13.3
14.5
18.8
8.4
24.7
11.4
8.9
12.0
10.4
10.7
8.5
18.1
9.4
13.2
9.3
9.7
9.9
10.9
15.5
15.8
8.5
13.9
14.2
15.9
24.7
13.9
8.8
15.9
11.2
5.7
8.6
16.8
20.7
8.8
19.4
11.0
23.5
15.0
Total
Equity
(S$m)
14.0
3193.0
965.5
940.3
397.4
838.1
1098.9
1495.7
688.3
2805.4
372.3
1695.3
784.6
750.1
565.8
856.0
1388.0
254.4
681.3
459.7
745.2
551.7
411.5
571.1
402.9
134.9
362.3
335.0
290.4
230.1
628.5
238.3
263.9
229.6
169.9
498.8
406.6
62.7
174.8
340.7
151.3
227.3
163.4
647.3
PBR
(x)
22.9
5.3
5.1
6.2
11.3
4.8
2.9
2.2
4.9
1.0
7.6
2.1
2.4
2.5
3.0
1.9
1.3
5.1
1.9
2.6
1.7
2.0
2.4
2.0
2.9
7.0
2.2
2.3
2.8
2.9
1.1
2.5
2.2
2.3
3.1
1.1
1.3
4.0
1.3
1.6
2.4
1.5
2.1
3.5
ROE
(%)
42.6
19.6
26.1
28.0
30.5
9.6
20.6
13.9
21.1
16.8
20.1
15.3
20.1
15.0
23.5
15.0
14.8
21.9
13.6
16.6
17.0
18.6
17.9
16.1
15.5
9.5
20.6
na
17.8
10.4
1.4
15.3
20.7
14.4
19.7
9.1
9.7
33.6
4.9
8.7
11.5
9.9
7.0
17.0
Yield
(%)
0.0
0.9
1.1
1.2
2.3
0.8
3.2
2.2
1.7
3.5
1.1
3.0
0.9
2.9
1.8
3.5
5.7
0.6
3.2
na
3.8
1.2
1.0
na
2.7
0.5
4.3
4.1
0.4
1.0
1.6
1.8
2.0
1.2
0.6
4.6
2.2
1.0
na
1.2
0.4
1.2
na
2.0
page 15
2010
80.9
(90.5)
(9.6)
(1.4)
(11.0)
2.2
0.0
0.0
(8.9)
1.8
0.0
(7.1)
166.3
166.3
2011
217.5
(197.6)
19.9
(1.6)
18.3
6.6
(0.2)
0.0
24.7
(8.5)
0.0
16.2
194.8
194.8
2012F
304.3
(274.6)
29.6
(2.3)
27.4
9.6
(0.5)
0.0
36.5
(10.9)
0.0
25.5
196.3
196.3
2013F
550.8
(460.5)
90.3
(2.6)
87.7
10.0
0.5
0.0
98.2
(29.5)
0.0
68.7
196.3
196.3
2014F
726.9
(615.6)
111.3
(2.7)
108.6
11.2
0.5
0.0
120.4
(36.1)
0.0
84.3
196.3
196.3
2010
10.9
0.0
3.5
14.4
32.7
11.4
9.0
9.3
62.4
20.0
6.4
6.2
32.6
19.9
16.1
36.0
8.2
0.0
0.05
76.8
76.8
2011
13.3
0.0
10.5
23.7
87.7
22.5
20.1
16.6
147.0
50.4
5.9
11.7
68.1
13.8
20.9
34.8
67.9
0.0
0.35
170.7
170.7
2012F
31.0
0.0
5.9
37.0
133.1
24.2
30.4
0.0
187.7
77.4
3.0
9.2
89.7
0.0
41.7
41.7
93.3
0.0
0.48
224.7
224.7
2013F
58.6
0.0
5.9
64.5
200.7
43.8
55.1
0.0
299.6
140.1
5.5
14.8
160.4
0.0
41.7
41.7
162.0
0.0
0.83
364.1
364.1
2014F
65.3
0.0
5.9
71.2
295.2
57.8
72.7
0.0
425.7
184.9
7.3
16.8
209.0
0.0
41.7
41.7
246.3
0.0
1.25
496.9
496.9
2010
(8.9)
15.9
21.9
(0.4)
0.0
28.5
(9.7)
0.0
0.0
(9.7)
7.6
10.9
0.0
(8.9)
9.6
28.5
20.9
6.4
2011
24.7
7.3
3.4
(8.8)
0.0
26.5
(4.0)
0.0
(4.7)
(8.6)
(6.5)
43.4
0.0
0.3
37.2
55.1
61.6
68.0
2012F
36.5
41.2
15.4
(11.1)
0.0
82.1
(20.0)
0.0
0.0
(20.0)
(16.7)
0.0
0.0
0.0
(16.7)
45.3
62.1
130.0
2013F
98.2
1.6
19.4
(23.9)
0.0
95.3
(30.2)
0.0
0.0
(30.2)
2.5
0.0
0.0
0.0
2.5
67.6
65.2
195.2
2014F
120.4
1.0
14.9
(34.1)
0.0
102.1
(9.4)
0.0
0.0
(9.4)
1.8
0.0
0.0
0.0
1.8
94.5
92.7
288.0
2010
24,185.3
62.4
(10.9)
(8.8)
(17.0)
20.0
0.0
40.7
116.1
204.7
2011
168.8
(306.8)
11.3
7.5
44.0
34.3
0.0
33.8
67.2
150.4
2012F
39.9
49.0
12.0
8.4
240.6
30.0
0.0
36.5
54.8
175.2
2013F
81.0
204.5
17.8
12.5
446.7
30.0
0.0
36.5
54.8
175.2
2014F
32.0
23.3
16.6
11.6
415.0
30.0
0.0
36.5
54.8
175.2
page 16
NRA Capital Pte. Ltd (NRA Capital) has received compensation for this valuation report. This
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confidentiality, available on request. You acknowledge that the price of securities traded on the
Singapore Exchange Securities Trading Limited ("SGX-ST") are subject to investment risks,
can and does fluctuate, and any individual security may experience upwards or downwards
movements, and may even become valueless. There is an inherent risk that losses may be
incurred rather than profit made as a result of buying and selling securities traded on the SGXST. You are aware of the risk of exchange rate fluctuations which can cause a loss of the
principal invested. You also acknowledge that these are risks that you are prepared to accept.
You understand that you should make the decision to invest only after due and careful
consideration. You agree that you will not make any orders in reliance on any
representation/advice, view, opinion or other statement made by NRA Capital, and you will not
hold NRA Capital either directly or indirectly liable for any loss suffered by you in the event you
do so rely on them.
You understand that you should seek independent professional advice if you are uncertain of
or have not understood any aspect of this risk disclosure statement or the nature and risks
involved in trading of securities on the SGX-ST.
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