4Q24: In line with estimates, but cut 2025F
4Q24 core profit was in line at Bt523mn, -7% YoY but +27% QoQ. SSS fell 8-9% YoY from a steel and truck shortage in January and 5-8% YoY in the first week of February from fragile purchasing power and lower steel prices - the sector’s weakest SSS YTD. With lower SSS and EBIT margin (higher SG&A/sales outpacing wider gross margin) amid expansion (7-9 stores in 2025F), we expect 1Q25F earnings to drop YoY but grow QoQ on seasonality.
Factoring in the weak SSS, we cut our 2025F by 15%, and expect 2025F to show no growth, making it less interesting than peers, who will grow 12% YoY on average. We thus downgrade our 3-month rating to NEUTRAL, reducing TP from Bt18.5 to an end-2025 DCF TP of Bt10 (WACC 7.2%, LT growth 2.5%) after revising earnings via a cut in our LT SSS growth assumption to reflect a weak market. Our TP will be adjusted to Bt9.6 to reflect the stock dividend after XD on Feb 27.
4Q24 net profit in line at Bt523mn, -7% YoY but +44% QoQ. 4Q24 core profit was Bt523mn, down 7% YoY on a poorer EBIT margin (narrower gross margin, higher SG&A/sales) and SSS contraction, but up 27% QoQ. GLOBAL announced a cash DPS of Bt0.184 with a stock dividend of 26 existing shares for 1 new share (XD Feb 27).
4Q24 highlights. Revenue rose 1% YoY as store expansion outpaced SSS contraction. In 4Q24, SSS shrank 3.7% YoY (vs -12.3% YoY in 4Q23 and -6.5% YoY in 3Q24), hit by weak purchasing power from the economic slowdown and lower steel product prices in late 4Q24 that outpaced benefits from the Bt10,000 cash handout to 14.5mn people and demand for renovations and repairs in flood-affected areas in early October. MOC data shows local rebar and light lip channel steel prices fell 4-10% YoY and 3-4% QoQ in 4Q24 (steel accounted for 15% of sales, slicing 1% YoY off SSS). In 4Q24, it opened new three stores, giving it 92 stores (+10% YoY and +3% QoQ), 90 in Thailand and two in Cambodia at end-4Q24. Gross margin was 25.9%, -30bps YoY but flat QoQ. The YoY fall reflected a lower margin on steel products in tandem with lower steel prices (estimated margin on steel products at 7-8% vs 10-11% normally) outpacing more high-margin private brand sales at 26% of sales (vs 24% in 4Q23 and 3Q24). SG&A/sales jumped 110bps YoY off a rise in SG&A (+7% YoY) from ramping up expansion. Equity income rose to Bt80mn (+132% YoY, +2% QoQ) on better earnings at existing stores in Myanmar with stable earnings from stores in Laos and Indonesia.
Termination of JV in the Philippines. After adjusting strategies to match the downturn in Thailand, on Feb 11, GLOBAL’s board approved terminating a 2022 JV agreement with Cosco Capital Inc. to set up Global House Philippines Co. Ltd. to operate a retail business in the Philippines; there has been no investment into this entity.
Earnings revised; situation in 1Q25TD. We cut our 2025F by 15%, cutting our SSS assumption to -0.9% from 3%. In January, we believe SSS fell 8-9% YoY, partly off: 1) a shortfall in steel supply from one of its local suppliers; 2) shipment disruption from a shortage of trucks as some trucks were stranded during the closure of sugar factories in Udon Thani after purchasing burned sugarcane in mid-January. Even after resolving January’s problems, in the first week of February SSS fell 5-8% YoY on weak purchasing power and lower steel prices. In 1Q25TD, local rebar and light lip channel steel prices are down 7-10% YoY and 2% QoQ (cutting SSS by 1% YoY).
Key risks are changes in purchasing power, in steel prices and farm income and new government policies. Key ESG risks are energy & waste management, sustainable products (E) and product quality management, labor practices and data privacy (S).
