Equity Analysis /

Index Livingmall PCL: Bottomed out; recovery in play

  • 3Q21 the operational nadir, QoQ rebound in 4Q21

  • Big jump for 2022—sales recovery and efficiency improvements

  • New business model to drive mid- to long-term growth

Bualuang Securities
21 September 2021

The stock price bottomed out in early August and has recovered substantially, but we believe it will rally further in anticipation of business improving, now that COVID-19 effects are easing. ILM currently trades at a 2022 PER of 14.6x, far below the Home Improvement mean of 25.6x (and still below its replacement value of Bt17.1/share). Our BUY call stands to a YE22 target price of Bt17.50, a 10% discount to DCF-derived value (8.5% WACC).

3Q21 the operational nadir, QoQ rebound in 4Q21

We expect ILM’s SSS trend to turn around to 3-5% growth in Sept after slumping by 20-25% in Jul and 30-40% in Aug, due to the hard lockdown—20 Index Living Mall stores (of 31) were partially or fully closed. We assume a 20-25% SSS dive for 3Q21. But online sales will hit a new record of Bt300m (15% of the top-line). 3Q21 core earnings will be the weakest of the year, in the Bt30-50m range (down by 65-80% YoY and 50-70% QoQ)—but far above the 2Q20 lockdown-squeezed number of Bt14m. For 4Q21, we expect a strong QoQ rebound (and a slightly YoY rise), driven by the release of pent-up demand.