Ginebra San Miguel (GSMI PM): Structural Growth Name 7x PE, 20% of Mkt Cap in Cash & 7.5% Div Yield

Ginebra San Miguel (GSMI PM): Gleanings From The Last 12 Years of Annual Reports and Q1 2024 Bonanza

Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/ginebra-san-miguel-inc" target="_blank" data-smartkarma-citation="entities:23029:1" rel="noopener">Ginebra San Miguel (GSMI PM)</a> is the world’s best-selling gin brand. It owns 97% of the Filipino gin market. It has a 185-year relationship with Filipinos and is synonymous with gin in the country. Its products are priced at 1/6th the price of large international competitors making its only competition other value for money spirits within the Philippines.Over the last five years, it started to regain share from other liquor products growing its top line at a CAGR of 14%. The gin market is expected to grow at 8% over the next few years. Over the last five years, it drastically improved its gross margin, operational efficiency, and capital efficiency leading to operating profit increasing at an average annual rate of 39% and pre-tax ROIC increasing from 4.7% in 2014 to 32.7% in 2019.There are some corporate governance concerns but those are more than priced in with GSMI trading below 3 times TTM EBITDA. Its closest competitor <a href="https://www.smartkarma.com/entities/emperador-inc" target="_blank" data-smartkarma-citation="entities:3485:1" rel="noopener">Emperador Inc (EMP PM)</a> is growing slower and generates a lower ROIC, but trades at 17 times 2019 EBITDA. Under the base case, there is 271% upside to the 2025 fair value per share of PHP194.22. Ginebra San Miguel looks attractive at current prices.

Ginebra San Miguel (GSMI PM) is the world’s best-selling gin brand. It owns 97% of the Filipino gin market. It has a 185-year relationship with Filipinos and is synonymous with gin in the country. Its products are priced at 1/6th the price of large international competitors making its only competition other value for money spirits within the Philippines.Over the last five years, it started to regain share from other liquor products growing its top line at a CAGR of 14%. The gin market is expected to grow at 8% over the next few years. Over the last five years, it drastically improved its gross margin, operational efficiency, and capital efficiency leading to operating profit increasing at an average annual rate of 39% and pre-tax ROIC increasing from 4.7% in 2014 to 32.7% in 2019.There are some corporate governance concerns but those are more than priced in with GSMI trading below 3 times TTM EBITDA. Its closest competitor Emperador Inc (EMP PM) is growing slower and generates a lower ROIC, but trades at 17 times 2019 EBITDA. Under the base case, there is 271% upside to the 2025 fair value per share of PHP194.22. Ginebra San Miguel looks attractive at current prices.

Ginebra San Miguel- The World’s Best Selling Gin Brand On Sale for Under 3 Times TTM EBITDA