• Share price jumped c.10% after news of year-end shopping incentive as books contribute 9.4% of sales revenue
• COL is targeting over 10% revenue growth in FY19F vs our 5.6% forecast
• Maintain NEUTRAL rating, DCF-based Bt25 TP; limited earnings growth outlook would cap share price performance

Expect limited upside from year-end shopping incentive

The recently announced year-end shopping incentive will be effective on 15 Dec 2018 to 16 Jan 2019. It is applicable to three product categories: tires (car and motorcycle), OTOP products, and books (including e-books, but excluding newspapers and magazines). The qualifying amount is capped at Bt15,000 per person and the tax deductible would depend on income level (because of progressive income tax structure). COL’s share price has risen c.10% in the last two weeks following this news. This is unjustified because B2S contributed 36% of COL’s revenue and 26% of B2S revenue is derived from books based on 9M18 numbers. This implies 9.4% of revenue would benefit from the shopping incentive.

Keep FY18F-19F earnings; FY19 target is challenging

Based on the above, we keep FY18F profit at Bt700m, up 39.4% yoy. This implies Bt112m profit in 4Q18F, down 38.5% qoq and 21% yoy. The significant qoq drop would be due to Bt32m (net tax) extra gain booked in 3Q18 and yoy drop due to depreciation charge for its new warehouse at Bt25m per quarter. Meanwhile, management targets over 10% revenue growth in FY19 (+2.4% yoy in 9M18). This is challenging as (i) COL has not achieved such growth in the past three years, (ii) we expect only mild contribution from new businesses for OfficeMate, and (iii) two key B2S stores at Central World and Central Ladprao will be renovated next year. We estimate revenue would grow 5.6% next year.

NEUTRAL, DCF-based TP Bt25; share price rally triggered by optimism over year-end shopping incentive would be short-lived

Our TP implies 23x FY19F PE, which is -0.5SD of its historical average multiple. The share price has fallen 27% YTD, which reflects its weak earnings outlook. We will review our recommendation when we see full contribution from all of its new businesses in 4Q19.