Puregold Price Club, Inc: Aggressive expansion continues

On track to meet estimates.

PGOLD’s margins in 1H15 seemed weak initially with Puregold brand stores registering a gross margin of only 15.0%. Accounting for the delayed booking of Php150Mil of gross profit last year, this implies a y/y decline of 50 basis points. However, management clarified that the decline was due to a change in accounting treatment which moved items down from gross profit to other income. Adjusting for this, gross margin of Puregold stores was flattish at 15.5% in 1H15, in line with our expectations.

Raising FV to Php55/sh on rollover, maintain BUY rating

We are raising our FV estimate on PGOLD to Php55/sh from Php50/sh as we rollover to end-2016 estimates. We are also maintaining our BUY rating on PGOLD as valuations on the stock remain cheap. At its current price of Php32/sh, the stock is being valued at 16.5X 2016E P/E, a discount relative to the 17.7X P/E of the market and the 20.5X P/E of other consumer stocks.

- COL Financial

Megaworld Corporation: Improved visibility on leasing expansion

We reiterate our BUY rating on MEG. We like MEG for the continuous expansion of its rental income portfolio. Based on the company’s expansion plans, total leasing portfolio will increase at a CAGR of 16.7% from 791,000sqm as of end 2014 to 1.7 Mil sqm by end 2019. Moreover, at its current price of Php4.30, MEG is trading at a steep 47.7% discount to NAV. Furthermore, MEG is trading at only 13.56X FY15 P/E, less than half of ALI’s current FY15E P/E of 30.5X. This is despite the fact that MEG is growing its more defensive rental income portfolio which should strengthen the company’s ability to withstand economic downturns going forward. As of FY14, operating profit from MEG’s leasing business accounted for 43% of consolidated operating profit, already larger compared to 32% for ALI. See full report here.

- Col Financial

COLing the Shots: Learning from past corrections and bear markets

COL Financial released their latest COLing the Shots report entitled "Lessons from past corrections and bear markets". 

Below are the key highlights of our latest view on the market:

• After studying the characteristics of two previous bear markets and three major corrections in the Philippines, we have two major insights, namely "This is just a major corrrection, not a bear market" and "There is a good chance that we have already seen the low."

• We believe that there is a strong likelihood that we have already seen the worst. With careful consideration of current market conditions, we think that now would be a good time to start accumulating stocks. Remember to choose quality names, to space your orders over a span of six months or to practice cost-averaging, and to determine an entry price that will allow you to capitalize on downward swings in the market. This is an opportunity to buy quality stocks that normally trade at expensive valuations. 

• After reviewing our stock picks, we have decided to remove FLI and add MEG and BDO to our COLing the Shots stock picks list.  

To access the full report, please click here.

- COL financial