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Pgold

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1.

INTRODUCTION

Profile of the company

Puregold Price Club, Inc. is a Philippines-based company engaged in the business of trading
goods, such as consumer products (canned goods, housewares, toiletries, dry goods, and food
products, among others) on a wholesale and retail basis. The Company operates in retailing
business segment. The Company conducts its operations through a hypermarket known as
Puregold Price Club, which offers a range of food and non-food products, and caters to both
retail customers and resellers. The Company has a supermarket chain known as Puregold
Junior, which is operated by its subsidiary Puregold Junior Supermarket, Inc. Its Puregold Extra
is the small store format, which offers a range of goods, comprising the Company's stock
keeping units (SKUs) ranging from 3,000 to 5,000. It operates through stores in various
locations. Its store provides products that range from groceries, apparel, household accessories
and furniture.

Puregold Price Club Inc (Puregold), a subsidiary of COSCO Capital Inc, trades consumer
products on a wholesale and retail basis. The company conducts its business operations
through retail formats and store brands. The company provides food items and beverages,
canned products and baby products, among others. Puregold operates supermarkets under
Puregold brand and offers food and non-food products to the company's hypermarkets and
discounters. The company operates through stores, hypermarkets, supermarkets and
minimarts. Puregold is headquartered in Paco, Manila, Philippines.

Puregold Price Club, Inc. (PGOLD) was incorporated on September 8, 1998 as a company
involved in the business of trading goods such as consumer products on a wholesale and retail
basis. The Company opened its first store in Mandaluyong City in December 1998. PGOLD's
loyalty program, “Tindahan ni Aling Puring”, was launched in 2004.

The Company conducts its operations through several retail formats and store brands.
Hypermarkets, through “Puregold Price Club”, offer a variety of food and non-food products and
generally cater to both retail customers and resellers such as members of the Company's
loyalty program. Supermarkets, through “Puregold Junior”, operate as a neighborhood store
which offers a higher proportion of food to non-food products vis-a-vis the Company's
hypermarkets. Discounters, through "Puregold Extra", operate in a small store format that offers
a more limited number of goods. Meanwhile, S&R Membership Shopping adopts a warehouse
club concept where most of the products offered are in club packs. Majority of the merchandise
are imported brand names mostly sourced from the US.

Among others, PGOLD also owns Entenso Equities, Inc., which is the holding company for two
companies, namely, Ayagold Retailers, Inc. and San Roque Supermarkets. PPCI Subic, Inc. is
operating one Puregold branch in Subic Bay, Olongapo City. In 2018, PGOLD incorporated
Purepadala, Inc. mainly to operate the remittance operation of the Company.

By the end of 2021, PGOLD was operating a total of 263 hypermarkets, 100 supermarkets, 28
extras, 39 minimarts, 22 S&R warehouse clubs, 47 S&R Quick Service Restaurants, three
Merkado branches, and 30 San Roque supermarkets, for a total of 532 stores all over the
country.
Board of Directors of Puregold Price Club,
Inc.

Chairman : Lucio L. Co

President : Leonardo B. Dayao

Treasurer : Susan P. Co

Corporate Secretary : Baby Gerlie Sacro

Assistant Corporate Secretary and Compliance


Atty. Candy H. Dacanay-Datuon
Officer :

The Board appointed the following


Committee Members:

Executive Committee

Chairman: Lucio L. Co

Members: Leonardo B. Dayao


Susan P. Co
Ferdinand Vincent P. Co

Audit Committee

Chairman: Edgardo G. Lacson

Members: Lucio L. Co and


Leonardo B. Dayao

Nomination Committee

Chairman: Susan P. Co

Members: Marilyn V. Pardo


Leonardo B. Dayao

Compensation Committee

Chairman: Lucio L. Co
Members: Edgardo G. Lacson
Leonardo B. Dayao

ECONOMIC ANALYSIS

Investment Risks Execution of Vis-Min expansion: PGOLD will venture into new waters
in its expansion into the Vis-Min region. Although this will be a key catalyst for growth, this
would also serve to test the execution of PGOLD‟s asset-light supply chain. Disruptions in the
supply chain could increase cost of operations, deplete margins, and limit the expansion
potential of 91 hypermarkets in Vis-Min. PGOLD addresses this risk in its partnership with third-
party agents and regional distributors. Competitive risks from SM: Growing competition with its
largest rival, SM Retail, is seen to intensify as SM undertakes expansion plans across the
country, which can lead to a price war as well as drive up leasing costs. This threat can be
mitigated through PGOLD‟s stronghold on resellers with the TNAP program which has a
membership base of 220,000. An asset-light model leading to healthy profit margins also equips
PGOLD for a possible price war with SM. Adherence to corporate governance standards seen
to improve Concerns on corporate governance are set to ease as the company transitions from
a family business to a public company. While PGOLD is compliant with all corporate
governance guidelines of the Securities and Exchanges Commission and as of October 2012
has committed no violations of its Revised Manual on Corporate Governance, full compliance
with PSE good corporate governance guidelines remains to be seen (see Appendix 23). Primary
concerns raised are regarding the board composition consisting mostly of Co family members.
This is financially materialized over concerns of related-party transactions composed of leasing
deals by family-owned properties and the brand licensing rights owned by Lucio Co. The
financial exposure to these transactions is set to decline as a percent of operational expenses
from 18% to just 11% from 2011 to 2016.
INDUSTRY ANALYSIS

Industry analysis shows PGOLD’s distinct competitive advantage Strong presence of


traditional retailers turned competitor to customer Traditional retailers currently occupy the
larger share of grocery retailing in the Philippines. Sari-sari stores pose the biggest threat to
modern retail (See Appendix 15 for complete Porter‟s Five Forces Analysis). They are
estimated to number around 1 million stores and account for 70% of grocery revenues overall.
Through the TNAP program, PGOLD has leveraged the threat of the strong presence of these
sari-sari stores by becoming the top supplier for their merchandise. PGOLD has already
reached 20% of sari-sari stores nationwide while still remaining in Luzon.

The sari-sari store is popular in the Philippine market due to its informal credit system
and sachet size SKUs. The informal credit system allows for consumers within the CDE class to
have easy access to consumer credit which drives consumption. The sachet sizes sold in
sarisari stores match consumption with the day-to-day wage earnings for the CDE market. 47%
of consumers buy from sari-sari stores as the main source of groceries. PGOLD is the first and
only retailer in the industry to strategically target sari-sari stores as a customer base. They
contribute 35% of PGOLD‟s revenues. We expect them to continue stable growth given strong
support from micro-finance industry. Sari-sari stores are a popular small enterprise that keeps
many home-based women employed, the Philippines‟ burgeoning micro-finance industry,
ranked 6th in the world, (see Figure 7) has lent financial muscle to ensure their stability for many
years to come. Philippine modern retailing transitioning to opening stages of growth cycle Amid
the strong presence of traditional retail, modern grocery retailing in the Philippines posted robust
growth amidst the global financial crisis. Between 2006 and 2011, value sales of modern
grocery retailing grew by a CAGR of 7.4% with hypermarkets posting double-digit growth at
17%. With the bulk of PGOLD‟s stores in the hypermarket format, revenue grew by a CAGR of
18% (see Figure 8). We identified the Philippines to be in the opening stage of global retail
development using AT Kearney‟s Global Retail Development Index (GRDI) (Appendix 16).

The country meets the four indicators of this stage: 1) middle class growing at 9% per
yearv ; 2) Consumers exploring organized formats evidenced by growth in modern retailing; 3)
government reducing restrictions through the liberalization of foreign ownership; and 4) minority
investment by foreign retailers in local retailers with Hong Kong-based retailer Dairy Farm
Holdings acquiring a stake in Rustan‟s SuperCenter. In this stage, growth potential for modern
retailers will not only come from a growing market but by a shake-out of smaller players.
PGOLD has already capitalized by acquiring Parco chain of supermarkets and has set aside P2
billion for acquisitions for 2013. PGOLD has focused growth, differentiated against competitors
While major players in grocery retailing such as SMvi, Robinsonsvii , and Rustan‟s viii have
witnessed robust growth (Figure 9), PGOLD has outperformed competitors with its broadbased
consumer play. While other retailers have diversified into non-grocery goods (See Appendix 17),
PGOLD has focused on essential spending, targeting low-income segments and traditional re-
sellers, cushiioning it from vulnerability to the global economy.SM and Robinsons are focused
on middle-income segments, whereas Rustan‟s is focused on upscale consumer segments.
While these segments have higher purchasing power, they only comprise 10% of the entire
population and remain heavily concentrated in Metro Manila (Figure 11). PGOLD‟s focus on
essential spending allows it to grow even during recessionary cycles and aggressively expand
stores regardless of long-term economic outlook. The acquisition of S&R represents a
diversified customer base but PGOLD‟s focus remains on grocery retailing.
On the other hand, SM also operates a department store which contributes 42.70% of
retail value (See Appendix 18). Robinsons operates a department store, hardware store
business, as well as convenience store Ministop. Rustan‟s also operates department stores and
high-scale specialist stores which retail imported brands. Rustan‟s is partnering with Ayala Land
to develop department stores and convenience stores in 2013. Regional analysis supports
upside of aggressive national expansion Expansion into Visayas and Mindanao is a key catalyst
for revenue growth. Our in-depth analysis into the local modern retailing sector shows a
potential for 91 hypermarkets in the Vis-Min region (See Appendix 19 for breakdown of
computation based on the Index of Retail Saturation formula).
COMPANY ANALYSIS

Retail / PureGold price club's Q1 2023 net income grows to P2.4B

RETAIL player Puregold Price Club Inc. has reported a 12 percent growth in net income
to P2.41 billion in the first quarter of 2023 from P2.15 billion in the same period last year, As of
May 12, 2013.

This growth can be attributed to higher sales. The company’s consolidated net sales for
the first quarter increased by 15 percent year-on-year, reaching P44.4 billion. In the first quarter,
the groupwide same-store sales saw an increase of 11.3 percent compared to the same period
last year.

Additionally, the company successfully opened five new Puregold stores, one S&R
Membership Shopping Warehouse, and one S&R New York Style QSR. As of the end of March
2023, the group had a total of 531 stores in the Philippines. 

Expansion
Puregold plans P1.2B expansion this year

Puregold Price Club, Inc. will spend around P1.2 billion to put up 25 grocery stores in the
country this year, a top official said, continuing an expansion that didn’t stop despite the
pandemic.

The grocery chain operator has already put up seven Puregold stores so far, with 18 more set to
open sometime this year, vice president for operations Antonio delos Santos. He said each
store costs around P50 million
TECHNICAL ANALYSIS

4.1.1 RELATIVE STRENGTH INDEX

The Relative Strength Index (RSI), is a momentum oscillator that measures the speed and
change of price movements. The RSI is most typically used on a 14-day period, measured on a
scale from 0 to 100. Traditionally, an asset is considered overbought or overvalued when the
RSI is above 70 and oversold or undervalued when it is below 30. A RSI surpasses the 30 level
indicates a bullish sign, when it slides below 70 level, it’s a bearish sign. This level can be
adjusted depending on the security’s pattern and the market’s underlying trend. In an uptrend or
bullish market, the RSI might range within a higher interval, investors could set the support level
higher. If a downtrend or bearish market occurs, investors may need to lower the resistance
level.

4.2.1 MOVING AVERAGE CONVERGENCE DIVERGENCE


Puregold Price momentum indicators tool provides the execution environment for running the
Moving Average Convergence Divergence indicator and other technical functions against
Puregold Price. Puregold Price value trend is the prevailing direction of the price over some
defined period of time. The concept of trend is an important idea in technical analysis, including
the analysis of momentum indicators. As with most other technical indicators, the Moving
Average Convergence Divergence indicator function is designed to identify and follow existing
trends. Momentum indicators of Puregold Price are pattern recognition functions that provide
distinct formation on Puregold Price potential trading signals or future price movement. Analysts
can use these trading signals to identify current and future trends and trend reversals to provide
buy and sell recommendations.

4.3.1SUPPORT AND RESISTANCE


4.4.1 STOCHASTIC
GRAHAM NUMBER

FORMULA: √22.5x book value per share x earnings per share

√ 22.5 X 28.84 = 136.80 X 3.24 = 443.232

• Any stock price above graham number are overvalue


• Any stock price below graham number are undervalue

BUYING/SELLING POSITION

PUREGOLD (PGOLD)

BUYING PRICE= P33.20 - MAY 9, 2023


SELLING PRICE=
RECOMMENDATIONS AND OVERALL ASSESSMENT

7.1 Has year 1 been than year 2 for the company?

Year 2 is better than Year 1 because Puregold has maintained its growth trajectory throughout
the year by being a dependable partner to its suppliers and utilizing its reach and scale to
benefit its community of carded members. The country's solid underlying fundamentals, unmet
demand, and relatively undeveloped retail environment will all contribute to the company's
continued expansion in its topline in the upcoming years.
7.2 Will the company succeed in the future?

As you can see, their returns are far higher than the market. The figures indicate that they have
been performing well and turning a profit. The people-centric concept of Puregold is very well
known. It evolved into the hypermarket with the best value and the most focus on the needs of
its customers. The company continues to offer Filipino families high-quality goods, services, and
business opportunities. However, Puregold may have a strong foundation based on broad
elements that contribute to a company's success. Their success as a retail business will depend
on their capacity to innovate and adapt in a continuously changing and competitive industry.
Being one of the largest retail chains in the Philippines, Puregold may also be financially stable.

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