Pan-Asia Equity Bottom-up, Wickhams Hill

Lloyd Moffatt

I am a fundamental-value investment analyst with a bent for events and soft catalysts.

During my time on both the buy-side and sell-side I focussed on small and mid-cap companies in ASEAN, Australia and HK/China.

Although a generalist, my background as an engineer lends itself toward deep-dive research in more practical sectors like consumer and industrials.

Previous recommendations include:

Concepcion Industrial		(CIC PM)	BUY	03/12/2015		+100.1%
OSIM International		(OSIM SP)	BUY	11/12/2015		+36.9%
Bellamy's Australia Ltd	(BAL AU)	SELL	08/06/2016		+60%
Pryce Corp				(PPC PM)	BUY	14/07/2016		+105%
Rukun Raharja			(RAJA IJ)	BUY	16/02/2017		+61%
Asian Pay Television Trust (APTT SP)	BUY	30/12/2016		+67%

Pan-Asia Equity Bottom-up

The Week that Was in ASEAN@Smartkarma - Two Tightenings, Pure Gold, and Lippo Group Opportunities?

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/13890" target="_blank" data-smartkarma-citation="entities:13890:1">Puregold Price Club (PGOLD PM)</a> is the second largest grocery retailer in the Philippines with over 20 years of history. The company has aggressively rolled-out a network of 393 stores across the country and targets low-middle income consumers entering the modern retail market.
Modern trade grocery retail is significantly under-penetrated in the Philippines, making up just 35% of the market, offers a significant opportunity for growth. To that end, the company will be expanding at a rate of 25 stores per year with a focus on Visayas and Mindanao, which currently makes up just 10% of their store portfolio.
We expect that Puregold's low price strategy and increasing collaboration with Sari Sari retailers will support growth into new areas, as well as underlying SSSg of 4-5%. This alone will drive 12-14% revenue growth and mid-teens EBIT growth over the next three years.
Puregold currently trades at PHP42, implying a market cap of P116bn (US$2.2bn). At this level the FY18 PER and EV/EBITDA multiples are 16.0x and 9.0x respectively but will fall to just 12.1x PER and 6.2x EV/EBITDA by 2020. Our DCF valuation of PHP 58.5 implies an FY18 multiple of 22.3x and 39% upside to the current share price.

Puregold Price Club (PGOLD PM) is the second largest grocery retailer in the Philippines with over 20 years of history. The company has aggressively rolled-out a network of 393 stores across the country and targets low-middle income consumers entering the modern retail market.
Modern trade grocery retail is significantly under-penetrated in the Philippines, making up just 35% of the market, offers a significant opportunity for growth. To that end, the company will be expanding at a rate of 25 stores per year with a focus on Visayas and Mindanao, which currently makes up just 10% of their store portfolio.
We expect that Puregold's low price strategy and increasing collaboration with Sari Sari retailers will support growth into new areas, as well as underlying SSSg of 4-5%. This alone will drive 12-14% revenue growth and mid-teens EBIT growth over the next three years.
Puregold currently trades at PHP42, implying a market cap of P116bn (US$2.2bn). At this level the FY18 PER and EV/EBITDA multiples are 16.0x and 9.0x respectively but will fall to just 12.1x PER and 6.2x EV/EBITDA by 2020. Our DCF valuation of PHP 58.5 implies an FY18 multiple of 22.3x and 39% upside to the current share price.

DEEP DIVE: The Golden Opportunity of PureGold