JMART Group Rallies, Analyst Recomm. “BUY”, Citing SINGER’s Solid 2Q Earnings Growth

The share price of Jay Mart Group continued to edge higher on July 14, 2021, in anticipation of solid growth in 2Q21.

As of the opening bell in the afternoon session, Jay Mart Public Company Limited (JMART) rose ฿0.50/share or 1.37% to ฿37.00/share, with a trading value of 494 million baht.

JMT Network Services Public Company Limited (JMT) rose ฿1.50/share or 3.33% to ฿46.50/share, with a trading value of 349 million baht.

Singer Thailand Public Company Limited (SINGER) rose ฿1.25/share or 2.96% to ฿43.50/share, with a trading value of 186 million baht.

KTBST Securities (KTBST) maintains an Outperform rating on JMART with a target price of 51 baht, citing JMART’s management guide for solid 2Q21 earnings growth QoQ for SINGER and stable earnings growth QoQ for JMT, softer earnings growth from J-Mobile and other subsidiaries could result in JMART’s 2Q21 earnings coming in at 249 million baht down 25% QoQ, but up 55% YoY, or flat growth QoQ if one-time capital gain booked in 1Q21 is excluded. 

The earnings outlook will depend on JMT, as each 10% decline in earnings will reduce JMART’s earnings by around 11%. The long-term growth prospects remain unchanged, and KTBST sees a share price pullback as a buying opportunity.

The COVID-19 outbreak would put the earnings forecast on JMT at risk, which would adversely impact JMART’s earnings forecast as the earnings contribution from JMT accounts for around 60% of JMART’s total. KTBST’s sensitivity analysis shows that every 10% shortfall in JMT’s earnings will reduce its earnings forecast for JMART by around 11%. Though a prolonged COVID.19 outbreak would threaten KTBST earnings forecast, it sees the share price pullback as a buying opportunity.

JMART guided that squeezing operating expenses is needed in 2Q21 due to pressure on revenue growth at J.Mobile, J.Asset, and JMT. JMART’s operating expenses have been up and down and its average SG&A/revenue ratio was around 16% in 2020 and 1Q21. KTBST thinks this ratio could be moved down to <15% to maintain 2Q21F at the same level QoQ.

To factor in core earnings from its main investment holdings (JMT, SINGER, and other subsidiaries), KTBST expects JMART’s 2Q21 earnings at 249 million baht (-25% QoQ, +55% YoY). This factors in a reduction in earnings contribution from KBJ to 49% (down from 97%) and takes it as share of profit in this quarter. The sharp fall QoQ reflects a high base in 1Q21 from gain on investment of 66 million baht from selling an equity stake in KBJ to Kookmin Bank. The solid earnings growth YoY reflects growth in earnings contributions from JMT, SINGER, and other subsidiaries.