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

Metro Retail Stores Group / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/23080" target="_blank" data-smartkarma-citation="entities:23080:1">Metro Retail Stores Group (MRSGI PM)</a> (MRSGI) is a retailer in the Philippines. It operates 52 supermarkets, department stores, and hypermarkets. Due to weak same store-sales growth and a fire at a supermarket and department store, the company share price has declined from a peak of PHP6.00 in August 2016 to a low of PHP1.91 in November 2018. The market values the company at an EV/trailing twelve month (ttm) EBITDA of 2.7 times and a price to book of 0.95 times. MRSGI’s is consistently profitable with an average return on equity of 15.9% over the past five years. It also has a pipeline of stores that will increase its gross floor area (GFA) by 19.5% over the next two years. Given the company’s profitability and growth potential, MRSGI appears to be undervalued. The base case scenario with conservative assumptions has 43% upside to a 2019 fair value per share of PHP3.27 and 87% upside to a 2023 fair value per share of PHP4.26.</p>

Metro Retail Stores Group (MRSGI PM) (MRSGI) is a retailer in the Philippines. It operates 52 supermarkets, department stores, and hypermarkets. Due to weak same store-sales growth and a fire at a supermarket and department store, the company share price has declined from a peak of PHP6.00 in August 2016 to a low of PHP1.91 in November 2018. The market values the company at an EV/trailing twelve month (ttm) EBITDA of 2.7 times and a price to book of 0.95 times. MRSGI’s is consistently profitable with an average return on equity of 15.9% over the past five years. It also has a pipeline of stores that will increase its gross floor area (GFA) by 19.5% over the next two years. Given the company’s profitability and growth potential, MRSGI appears to be undervalued. The base case scenario with conservative assumptions has 43% upside to a 2019 fair value per share of PHP3.27 and 87% upside to a 2023 fair value per share of PHP4.26.

Metro Retail Stores Group (MRSGI PM)- A Fire Sale at a Filipino Retailer