Technical analysis PGOLD

Although the average basket size of Puregold’s 3rd quarter (3Q) grew by 52 percent year-over-year to PHP 991.00, this failed to counter the effect of customer traffic plummeting by 36 percent, leading to Puregold ‘s revenues dropping marginally by 2 percent to PHP 28.8 billion. Meanwhile, S&R topline remained robust to PHP 10.4 trillion with 11% year-over-year growth as its top end-customers have been less affected by the pandemic.

However, as Puregold stores account for 81 percent of PGOLD’s 583 K sqm net selling space, total sales stayed flat for the quarter at PHP 39.2 trillion.

Lower annual third-quarter earnings are attributed to a fall of 16% or PHP 686 million in other operating profits, owing to the lower-income contribution of COVID-19 tenants. EBIT margins were reduced by 43 bps to 11.2 percent. The third quarter income declines were also attributable to a 23% year over year interest rise at PHP 524.9 million due to the effect of PFRS16 (leases) both for old and new companies.

The outlook remains positive for the remainder of the year, as the 4th quarter (4Q) typically contributes for at least 30% of the company’s profits, boosted by holiday spending. Management has directed supplier support to stay intact in December, and this could bode well for advancing margins. On another note, information about pipeline transactions and acquisitions were not wholly disclosed, but perhaps we should see some progress in 2021. PGOLD currently trades at 15.7x price-over-earnings vs. 19.5x. PGOLD’s target price is 53.00 per share.

Recommendation

Buy with a target price of 53.00

LEAVE A REPLY

Please enter your comment!
Please enter your name here