1Q13 NPAT came at Rp75bn, forming 12% of our and consensus’ full-year estimates. This is not really a surprise, as management has earlier been guiding for weak 1Q13, as:
- flood affected its central distribution in Jakarta,
- absent of key products launching affected its volume
- changes in import regulation affected some importation activities in the beginning of this year (which also led to doubling interest expenses as ERAA stocked up more inventories).
Sales still in-line if not for the 2-weeks flood disruption. On a YoY basis, 1Q13 NPAT fell 5.3%yoy as sales declined 7.5%yoy to Rp2,935bn. Weak sales (17% of us and consensus) came on the back of the Jakarta flood that disrupted ERAA’s central distribution in Jakarta for about two weeks long, affecting sub-distribution across cities. Had there been no flood, we estimate that ERAA”s sales would have been Rp3,522bn, an increase of 11%yoy and 9%qoq, still in-line with 20-21% realization to our and consensus’ full-year forecast.
Stores opening seasonality affected weak 1Q13. Seasonality in the retail stores opening also contributed to the weak 1Q13 sales. Out of the targeted 105 net stores opening (including stores closures), ERAA only realized a total net opening of 2 stores in 1Q13. The company keeps its opening target unchanged, expecting the roll-out to ramp up in 2Q13 onwards.
Expect a strong rebound 2Q13. We still expect a strong rebound in 2Q13, on account of a) sharp reduction in BB grey market handset (from 30% to 5% post new import ruling) that should benefit ERAA, b) strong new products pipeline (BB Z10, Samsung Galaxy S4, and BBQ10), b) normalized distribution and inventory after flood issues and new import ruling, and c) better stores opening seasonality. Beyond 2Q13, we think that the key catalyst would be the potential launching of BB R10, the mid-end segment for BB10.
Indonesia Market Summaries, 2 May 2013.
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