China retails sales slows in May
[6/13/12] – OCBC Research says data released on Saturday shows that China's retail sales grew 13.8% YoY in May to RMB1.7 trln, marginally lower from the 14.1% growth in April and lower than economists' expectation of a 14.2% rise but still acceptable.
Adjusted for inflation, May's figure was up 11% YoY.
For the first five months of FY2012, retail sales totaled RMB8.2 trln, up 14.5% YoY.
China's rate cut last Thursday had already caused many to anticipate disappointing economic data over the weekend.
Inflation slowed to 3% in May from 3.4% in April, which should give the central bank more leeway to enact further interest rate cuts.
The broker believes that domestic demand could be boosted starting in Q3 FY12.
According to the Ministry of Commerce, China recorded 194 mln online shoppers and RMB782.6 bln in online retail trade last year.
The sales were 53.7% higher YoY and accounted for 4.3% of China's total consumer goods retail volume in 2011.
The importance of the online channel is increasingly recognized by retailers.
In Feb, Walmart increased its stake in Yihaodian, the biggest online grocery retailer in China, to 51%.
Department store retailer Neiman Marcus invested in the Glamour Sales site in March.
In May, Macy’s invested in online retailer VIPStore, which operates jiapin.com.
Even if online retail sales continue to grow at 50% p.a. through till 2015 and total retail sales grow at a conservative 10% to 15% per annum, physical retail sales can grow at a healthy 7% to 12% p.a.
Among real estate investments, retail is quite heterogeneous, whereby differentiation and strong execution are key.
OCBC has confidence in CRCT's operational capability given its manager is a wholly-owned subsidiary of CapitaMalls Asia.
Hence, it has maintained BUY rating with target price of S$1.44 and says the stock is trading at an attractive FY12 dividend yield of 7.4%.
Investor Central. We ask the questions that need to be asked:
1. With China’s retails sales dropping and disappointing economic data, are footfalls declining?
2. How does CapitaRetail plan to compete with the increasing online stores?
Publish date: 13/06/12