Siam Global House: An In-depth Financial Analysis

Date: December 16, 2024

Broker: Maybank Securities (Thailand) PCL

Introduction

Siam Global House Public Company Limited (GLOBAL TB) is a prominent retailer of home improvement products and building materials. The company operates extensively in Thailand with additional stores in Cambodia, Laos, and Myanmar. This report, prepared by Maybank Securities (Thailand) PCL, provides a comprehensive analysis of Siam Global House’s financial performance, strategic initiatives, and future outlook.

Current Market Position and Financial Forecast

GLOBAL is recognized as a leading retailer in the building materials and home improvement sector in Thailand. As of February 2024, the company operates 84 stores in Thailand, 21 stores in CLM countries, and 13 in Indonesia, with ongoing expansion into the Philippines. In Thailand, GLOBAL plans to open 8-9 new stores annually, strengthening its market presence in the country’s northeast, where 42% of its stores are located.

Financial Performance Overview

Despite the challenges faced in 2024, including slow recovery in same-store sales growth (SSSG) and increased selling, general, and administrative expenses (SG&A), GLOBAL’s financial structure remains robust. The FY24 earnings saw a 12% year-on-year decline, attributed to weak SSSG and elevated SG&A. However, the company is projected to experience a 21% growth in FY25, driven by a positive SSSG of 3%, the opening of new stores, and gross margin expansion.

Key Financial Metrics

• Revenue: Expected to increase from THB32,351 million in FY24 to THB35,133 million in FY25.
• EBITDA: A forecasted rise from THB4,283 million in FY24 to THB4,967 million in FY25.
• Net Profit: Anticipated recovery to THB2,848 million in FY25 from THB2,348 million in FY24.
• Core FDEPS Growth: Projected to increase by 21.3% in FY25 after a 15.6% decline in FY24.

Strategic Initiatives and Expansion Plans

GLOBAL’s strategic focus is on expanding its store footprint and enhancing product offerings, particularly house-brand items. The company aims to increase the proportion of house-brand products to 25% by FY25, up from 24.1% in FY24. This shift is expected to enhance gross margins, which are projected to rise to 26% in FY25.

Additionally, GLOBAL plans to open 11 new stores in FY25, primarily in the North, Northeast, and South of Thailand. The company has already secured land for these new locations, steering clear of the highly competitive Bangkok market.

Environmental, Social, and Governance (ESG) Commitment

GLOBAL is committed to sustainability, integrating ESG principles into its operations. The company has installed solar panels across all stores, contributing to a significant reduction in CO2 emissions. Furthermore, GLOBAL is focused on enhancing energy efficiency through innovations like Automated Storage & Retrieval Systems and LED lighting.

From a governance perspective, GLOBAL maintains a board comprising 40% independent directors and actively promotes diversity and inclusion within its workforce.

Risk Assessment and Challenges

Potential risks for GLOBAL include fluctuations in steel prices, which affect profitability, and delays in price adjustments to counteract cost inflation. Additionally, the company faces challenges in maintaining competitive pricing amidst aggressive market promotions.

Conclusion and Recommendation

Maybank Securities maintains a “HOLD” recommendation for Siam Global House, with a revised target price of THB16.60, reflecting a 6% potential upside. While the company’s valuation appears demanding relative to industry peers, the strategic expansion and improved operational efficiencies present a positive long-term outlook.