[Click eStock] "BGF Retail, Welcome With Corona"

Despite a Slight Slowdown Due to August Monsoon Season... September Disaster Relief Payments Offset Weakness
Korea Investment "Maintains BGF Retail Target Price at 220,000 Won"

[Asia Economy Reporter Gong Byung-sun] BGF Retail, which operates the convenience store CU, is expected to record third-quarter earnings this year that meet market consensus. The normalization of school attendance and the recovery of outing demand, which signify a phased return to normal life under With Corona, are also expected to act as positive factors.

On the 18th, Korea Investment & Securities estimated BGF Retail's third-quarter sales this year to be 1.8386 trillion KRW, up 9.3% from the same period last year, and operating profit to increase by 15.8% to 73.6 billion KRW. These figures correspond to the consensus of 1.0824 trillion KRW and 74 billion KRW, respectively.

Same-store sales growth is expected to be around 2%, similar to the second quarter of this year. August was somewhat unsuitable for consumption due to the monsoon season. However, July and September showed weather favorable for outings, and disaster relief funds were distributed, which is expected to offset the poor same-store performance in August.

(Provided by Korea Investment & Securities)

The benefits of With Corona are also anticipated going forward. Despite COVID-19, the monthly average store count growth rate in the convenience store industry from last year through August this year was 6.1%, higher than 4.7% in 2019. Kim Myung-joo, a researcher at Korea Investment & Securities, explained, “The high store count growth rate of BGF Retail is because the expected sales per convenience store channel remain larger than those of other franchise stores,” adding, “With various store support policies, the number of stores has significantly increased, centered on top companies like BGF Retail.”

As With Corona becomes full-fledged, growth in the industry and same-store sales in convenience stores is expected. Especially, benefits are anticipated mainly for top companies that have significantly increased their store count after COVID-19. Furthermore, if school attendance normalizes and outing demand recovers, the fourth quarter is expected to perform better than the second and third quarters despite being the off-season for the convenience store industry.

Accordingly, Korea Investment & Securities maintained a ‘Buy’ rating and a target price of 220,000 KRW for BGF Retail. The closing price on the 15th was 168,000 KRW.