Investing in Philippines: Puregold Initial Public Offering

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Tuesday, August 23, 2011

Puregold Initial Public Offering

source: http://puregold.com.ph/


I was glancing at my Google Alerts in my Outlook mail when my eye caught this news.



SEC approves Puregold’s P12.4-b public offering


by Jenniffer B. Austria


The Securities and Exchange Commission en banc approved Friday the P12.4-billion initial public offering of Puregold Price Club Inc., the supermarket chain owned by Filipino-Chinese businessman Lucio Co.

Based on the approved timetable, Puregold said it would set the final price of the shares on Sept. 21 and start offering them from Sept. 23 to 29. It plans to list the shares on Oct. 5.

The company will offer up to 600 million in primary and secondary shares and another 90 million common shares to cover overallotment.

The public offering could generate as much as P12.4 billion in proceeds based on an assumed maximum price of P18 per share.

Puregold said it was spending P6.26 billion from 2011 to 2013 primarily to put up new stores in Davao, Rizal, Cavite, Bataan, Pangasinan, Baguio City, Ilocos Norte, Caloocan, Bulacan, Camarines Sur, Laguna, Quezon City, Legaspi City, Iloilo City, Leyte, Cebu City, Tarlac City, La Union and Albay.





Puregold said it would use proceeds from the IPO to settle debt and finance store expansion.

The company plans to settle P2.24 billion worth of debt with China Banking Corp., Metropolitan Bank & Trust Co. and Banco de Oro Unibank.

The supermarket chain hired HSBC and UBS AG as joint global coordinators and international lead managers and BDO Capital and Investments Corp. and First Metro Investments Corp. as domestic lead underwriters.

Net sales reached P17.3 billion in the first six months of 2011, up 41 percent from P12.3 billion year-on-year while net income grew 270 percent to P782 million from P212.2 million.

Puregold will offer 500 million in primary shares and 100 million in secondary shares owned by existing shareholders, including Lucio Co and Susan Co.

The company plans to sell up to 420 million common shares to international investors and 180 million to local investors.
Puregold is the second-largest retailer among the hypermarkets, supermarkets and cash and carries in the Philippines based on gross sales in 2010.

The company has grown significantly since it commenced operations, expanding its business from one store in 1998 to 72 in 20 cities and 22 municipalities throughout Metro Manila as of end-July 2011.

The company focuses on two customer segments, which are retail customers and resellers. It offers three retail formats and store brands, namely hypermarkets, supermarkets and discounters.


Approximately 65 percent of its customers are C and D markets with a monthly income of P8,000 to P50,000.
Source: http://www.manilastandardtoday.com




In my opinion we should do our due diligence before jumping into this IPO. The expansion of Puregold has greatly help its bottomline and also since part of the proceeds of the IPO is to be use to settle obligations the remaining payment will be use to put up more stores specially in the far flung provinces in Northern Luzon and probably Mindanao.


It is a new opportunity but again one should carefully study Puregold's long term profitability. I am searching for available financial statement of the company to do fundamental analysis but so far haven't found one. If you know where to find one please leave link in the comments below.

3 comments:

Investing in Philippines said...

a comment from the great Mr. Gus Cosio at www.guscosio.com:

A few readers have asked about my views regarding the prospects for Puregold IPO. Well, I did attend the investors briefing and have kept abreast of what has been going on since. One of the key numbers that attracted me was the 1H-2011 net income of Php782 million which I reckon would exceed Php 1.7 billion for full year 2011 given that they will be opening 25 new stores before year-end 2011. I am also comfortable with some analyst projections that 2012 net income could exceed Php 2.3 billion. It is a low marging business, but these guys seem to have a strong handle on the market. Puregold is somewhat of a household name already in the NCR being ubiquitous in the region. Indeed, they have a well defined business plan and have the logistics to make it happen. It is surely a pure play on the mass market consumer spending in the same way that Warren Buffet believed that American consumers would flock to Walmart during tough economic times. Puregold also has strong operating cash flow which is unlike the Uniwide of more than a decade ago which went bankrupt after the IPO because they went into non-core businesses. I think Puregold is 100% focused on their business model because it makes a lot of money. If it ain’t broke, why fix it?

Stock Market India said...

Wow that's quite informative as well as interesting to read. Truly speaking I enjoyed reading ur post. I would try to follow your informations.

Louis Delos Angeles said...

Thanks Stock Market India!

Chitika