Analysis

Unwarranted downturn

Share price has dropped 8% to start the year, partially tracking the weakness of the broader index and prior to the release of full-year 2020 (FY20) results. The decline seemed unabated since the stock hit its 52- week high of P54.00, bringing the stock down by 30%.

Fundamentally, profitability margins remained resilient, only tracking pre-pandemic levels by 20-40 basis points. PGOLD continues to benefit from its pure play retail model, having the least disruption in its operations during the stretch of various community quarantine levels. As such, we expect full-year 2021 (FY21) EPS to increase by 15% on the back of organic expansion and possible M&A.

S&R to withstand new competitors

New players have entered the membership-only warehouse space such as Landers and MerryMart’s (MM) Wholesale Club, which will commence operations in April. PGOLD’s S&R seems to relish its dominance, raking in at least P500 Million in membership fee income alone since 2018, with a 14% 5- year CAGR.

Recommendation

Maintain Buy rating. PGOLD is trading at 13.3x forward Price-to-Earnings (P/E) ratio, a 27% discount from its 5-year average of 18.8x.

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