When it comes to wealth in Thailand, one family stands at the top: the Chearavanonts. They are not only the richest family in the country but also the proud owners of a company called Charoen Pokphand Group (CPG). While Thai names may not be familiar to you, there’s a good chance you have come across the CP brand on various frozen food products.
Charoen Pokphand Group, or CPG, is an impressive conglomerate with a wide range of businesses. They are involved in food, convenience stores, supermarkets, telecommunications, poultry, motorcycles, and they even make significant investments in companies like Ping An, Itochu, and CITIC. In this article, we will focus on a specific aspect of CPG called CP All, which presents an exciting investment opportunity for those interested in Thai stocks.
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CP All is a part of the larger Charoen Pokphand conglomerate, and what sets it apart is that it is a publicly traded business, unlike its privately held parent company, CPG. This means that ordinary investors like you and me can invest in CP All. Moreover, CP All is the fifth largest company in Thailand in terms of market capitalization, and CPG retains a considerable 35.26 percent ownership stake in CP All. Thus, CP All can be considered a crown jewel within the conglomerate.
In this article, we will explore the business of CP All and why it’s worth your consideration as a Thai stock investment.
CP All: The retail business in the Chearavanont’s Empire
CP All is primarily engaged in two key areas: the exclusive rights to operate 7-Eleven stores in Thailand, Cambodia, and Laos, and the operation of grocery wholesale and retail outlets through Makro and Lotus supermarkets.
The 7-Eleven franchise has become an integral part of daily life for many in Thailand, offering a wide range of convenience products and services. With CP All holding exclusive rights to operate 7-Eleven stores in Thailand, Cambodia and Laos, it has established itself as a leading player in the convenience store market.
On the other hand, CP All also manages the operations of Makro and Lotus supermarkets, catering to customers’ grocery needs. These supermarkets offer a diverse selection of products, ranging from fresh produce and household essentials to electronics and clothing. The Makro brand primarily focuses on wholesale operations akin to Costco in the United States, while Lotus supermarkets cater to retail customers just like our NTUC Fairprice and Sheng Siong in Singapore.
In the financial year 2022, convenience stores accounted for 48% of the CP All’s revenue. However, they played an even more significant role in generating profits, contributing to 62% of the total. This highlights the profitability and success of the 7-Eleven stores operated by CP All.
Meanwhile, the grocery segment, which includes Makro and Lotus supermarkets, accounted for 52% of CP All’s revenue. Although it generated a substantial portion of the company’s income, it contributed to 38% of the profits. This indicates that while grocery sales make up a significant portion of the company’s revenue, the convenience store business remains the primary driver of profitability for CP All.
The success of the convenience store segment and the grocery segment highlights CP All’s ability to cater to the diverse needs of consumers, thereby solidifying its position as a key player in the retail industry within the Chearavanont family’s business empire.
Dominance in the Convenience Store Market of Thailand
With an extensive network of 13,838 stores as of 2022, CP All boasts the largest network of 7-Eleven stores outside of Japan. This impressive number signifies the widespread presence and accessibility of CP All’s convenience stores, which have become an integral part of daily life for many consumers.
In terms of market share, CP All maintains a commanding position in the convenience store sector, holding approximately 64 percent of the market share. Notably, competitors such as Lotus’s Go Fresh and Mini BigC hold market shares of 9 percent and 6 percent respectively, highlighting CP All’s substantial advantage in terms of market dominance.
Furthermore, CP All has expanded its footprint beyond Thailand. By the end of 2022, the company successfully opened 42 stores in Cambodia, establishing a strong presence in the neighboring country. This expansion showcases CP All’s ability to adapt its successful business model to new markets, catering to the needs and preferences of consumers in different regions.
Looking ahead, CP All has ambitious plans to venture into Laos. In 2023, the company aims to inaugurate its first store in the country, further expanding its reach and establishing a foothold in the Laotian market.
Dominance in the Supermarket Industry of Thailand
In addition to its stronghold in the convenience store sector, CP All demonstrates significant influence in the supermarket industry through its ownership of two prominent supermarket brands: Makro and Lotus.
In 2020, CP All made a noteworthy move by successfully acquiring Tesco Lotus from Tesco, solidifying its position in the supermarket space. Despite initial concerns about the combined market share of Makro and Tesco Lotus reaching 75.8 percent, the acquisition was approved by Thailand’s Office of Trade Competition Commission (OTCC). This decision affirmed CP All’s dominance in the supermarket industry, showcasing the company’s influential presence and its ability to navigate regulatory challenges.
While there may be ongoing debates regarding the classification of Makro as a wholesaler and Lotus as a retailer, the undeniable truth remains that CP All holds a dominant position within the supermarket sector. The extensive product offerings, competitive pricing, and widespread availability of Makro and Lotus supermarkets have contributed to CP All’s prominence and market dominance.
Steady Growth and Resilience: CP All’s Financial Performance
CP All has demonstrated its ability to maintain its revenue during the challenging period of the Covid-19 pandemic, which is undoubtedly commendable. In FY2022, the company achieved a remarkable milestone with a 45% growth in revenue, reaching a record high.
The recovery from the Covid-19 pandemic played a crucial role in CP All’s revenue growth. The convenience store business began to bounce back at the start of 2022, benefiting from the overall economic recovery and the return of consumer purchasing power to normal levels. Additionally, the revival of the tourism sector, with an increase in both Thai tourists and foreign visitors in 2022, provided further support to CP All’s revenue growth.
However, while revenue soared, net profits did not witness a substantial improvement, rising by a modest 2% in FY2022. This can be attributed to several factors, such as a significant increase in expenses related to sales, electricity prices, and employee benefits, which rose by 33.4% year-on-year. The expense increase was primarily a result of CP All’s restructuring, which involved the combination of Makro and Lotus into one business. Nevertheless, it is expected that CP All will gradually find synergies and streamline costs, eventually boosting profitability.
Prior to the impact of Covid-19, CP All had a consistent track record of dividend growth. However, during 2020 and 2021, the company reduced dividend payments in response to the challenges posed by the pandemic, a decision that was understandable given the circumstances. Encouragingly, in FY2022, CP All raised its dividend payments once again, signaling a positive sign of recovery and stability.
Analysts have expressed overwhelmingly positive sentiments towards CP All, with 25 buy recommendations and 4 holds, and no sell ratings. According to the consensus among analysts, there is a potential return of 14.8% on CP All, highlighting the optimistic outlook for the company.
Investing in CP All on the SGX
For investors looking to tap into the growth potential of CP All, the good news is that CP All SDR is set to be traded on the Singapore Exchange (SGX). This provides an opportunity for investors to conveniently invest in CP All through a new financial instrument known as Singapore Depository Receipts (SDRs). SDRs are instruments with each representing beneficial interest in an underlying security listed on an overseas exchange.
SDRs offer a convenient way for investors to participate in the an overseas market through a platform they are familiar with. Investors can enjoy several advantages.
Firstly, investing in CP All SDR on the SGX allows investors to trade in a familiar environment. They can transact in Singapore dollars (SGD) instead of dealing with foreign currencies, eliminating the need for currency conversion.
Additionally, investors benefit from adhering to SGX trading hours and regulations. This means they can trade CP All SDR during SGX’s regular trading hours, which is longer than the Stock Exchange of Thailand’s trading hours.
Moreover, when investors purchase CP All SDRs on SGX, their holdings are custodized in the Central Depository (CDP). This provides a secure and regulated custodial system for holding and managing the SDRs, ensuring transparency and efficient settlement processes.
By offering CP All through SDRs on the SGX, investors gain access to the Thai stock market without the need for direct engagement with foreign exchanges or complex processes. They can leverage the familiarity, convenience, and regulatory framework provided by SGX to seamlessly invest in CP All.
Find out more about SDRs here or read my Ultimate Guide to SDRs.
You may also be interested in my analysis of AOT and PTTEP, two state owned enterprises and powerhouses of Thailand’s economy.
Invest with the Richest Family in Thailand
CP All’s commanding presence in the convenience store and supermarket sectors solidifies its position as a dominant force within the retail industry. As a crown jewel within the Charoen Pokphand Group (CPG) empire, CP All holds significant strategic importance and serves as a key pillar of the conglomerate’s success.
The close relationship between CPG and CP All is evident through CPG’s sizeable 35.26 percent stake in the company. This underscores the deep vested interest CPG has in the continued prosperity of CP All.
For investors seeking to capitalize on CP All’s potential, the introduction of Singapore Depository Receipts (SDRs) on the SGX presents a convenient opportunity.
With its dominant market presence, strategic significance, and the avenue for convenient investment through SDRs on the SGX, CP All offers a chance for investors to participate in a leading player in the Thai retail landscape and to invest alongside Thailand’s wealthiest family.
Disclaimer: This article is sponsored by SGX, but the opinions expressed herein are solely those of the author.
