What's newRed Star Macalline (RSM) announced it had recently entered intostrategic cooperation with both Vanke and Shimao. We believeRSM will benefit from its cooperation with theseresidential real estate developing giants due to:
Creating a one-stop service by extending the valuechain from furnishing retailer to property developer, so thatRSM can meet customers’ demands from housing to homefurnishing.
Enlarged member base: Vanke and Shimao will sharetheir member resources with RSM, meaning their customerswill become RSM members and be able to enjoy premiumservices and discounts on home furnishings.
Data sharing: RSM will also share data resources with thedevelopers so as to better understand their customers andoffer better marketing and product strategies throughvertical data sharing.
CommentsWe expect the cooperation to further increase RSM’scompetitive advantages over traditional channels interms of shopping experience and customer base. RSMhas gained a leading market position in >100 cities across China.
Currently, the top five players only account for 6% of the totalmarket, suggesting huge consolidation potential.
Valuation and recommendationMaintain Conviction BUY rating. We expect recurrent profitto grow by 24.7%/30.4% in 2015/2016. The stock currentlytrades at 12.2x/9.4x 2015/2016e P/E.
RisksHome furnishing market slowdown; increased competition.