Market issue/event

HOME has opened another branch in Isabela as part of its ongoing expansion outside of Metro Manila. The new store, spanning 7,300 square meters, is the 7th branch to open in Luzon that is outside of Metro Manila, and is the 15th large free-standing store format. It also brings HOME’s total store network to 52 branches.

Opinion

Catalyst for HOME remains to be its aggressive expansion of store network. We note that in 2017, WLCON’s NSA was larger by 117% at 306K sqm, but has narrowed down to nearly 35% last year. Moreover, higher revenue contribution of in-house brands should also translate positively on its gross margins.

As of the third quarter 2020 (3Q20), gross margins improved by 170 bps YTD to 31.8% despite the pandemic and we expect this to continue to grow as HOME continues to expand its network. We have a target price of P9.60, based on a P/E multiple of 30.0x, similar to regional industry peers like WLCON and HMPRO.

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