BGF Retail beats bigger rival GS Retail in stock performance and income estimate

2022.08.09 13:06:58 | 2022.08.09 15:51:12

CU convenience store. [Photo by BGF Retail Co.]이미지 확대

CU convenience store. [Photo by BGF Retail Co.]

South Korea’s second largest convenience store chain operator BGF Retail in terms of outlet count proving a winner in a bearish stock market is projected to outperforms its bigger rival GS Retail in annual income on better management in inflation environment.

BGF Retail shares have gained nearly 20 percent this year to date, hovering around 180,000 won. The stock far outruns the broader Kospi market, which lost 16.3 percent over the same period. Shares of the CU convenience store operator hit a 52-week high of 204,000 won in mid-May. Since then, the stock has lost only about 15 percent. On Tuesday, BGF Retail shares closed at 178,500 won, up 2.6 percent from previous day.

In contrast, GS Retail, industry No. 1 and operator of GS25 convenience store chains, has been mired in a slump. Its stock price hovers around 25,000 won after having lost nearly 18 percent so far this year. It recorded a fresh 52-week low of 23,150 won in July. That is 64.1 percent down versus its all-time high of 69,600 won made in 2015. The stock closed Tuesday at 25,750 won, up 3 percent.

Institutions have net purchased 114.8 billion won worth of BGF Retail shares this year to date, whereas foreigners and institutional investors have net sold 40.3 billion won and 20 billion won worth of GS Retail shares, each.

BGF Retail appealed better on stronger income growth from high-margin products under inflation environment.

BGF Retail’s operating profit and sales for this year is estimated at 259.0 billion won and 7.61 trillion won, respectively, up 30.2 percent and 12.2 percent from last year. Its operating profit margin for this year is also forecast to improve to 3.4 percent from 2.9 percent last year.

Convenience store industry sees 4 percent in operating margin as a major crossing line for stronger profitability.

GS25 convenience store. [Photo by GS Retail Co.]이미지 확대

GS25 convenience store. [Photo by GS Retail Co.]

GS Retail is expected report slower profit growth this year due to high costs. GS Retail’s operating profit for this year is estimated at 235.0 billion won, up 12.9 percent from last year. But its operating profit margin is expected to remain the same at 2.1 percent.

GS Retail’s slower profit increase is blamed to the rise in selling, general, and administrative expenses, which are estimated to jump 15.9 percent on year to 11 trillion won this year. BGF Retail is expected to show a smaller 11.6 percent increase in SG&A expenses this year.

Massive spending on corporate-wide digitalization project also weighs on GS Retail amid rising economic uncertainties.

Stock brokerage firms have revised downward their price target for GS Retail stock. Samsung Securities recently cut its target to 23,000 won from 26,000 won, and Shinyoung Securities to 30,000 won from 34,000 won.

By Cha Chang-hee and Cho Jeehyun

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