Since this is my first post in Fundamental Analysis, I made it simple and easy to understand.
Gross Profit (GP)
GP = Net Sales(NS) – Cost of Sales(COS)
GP = Benta – Puhunan (defined for newbies in FA)
GPM = Gross Profit Margin = GP/NS
It is important to know that the GP is the lifeblood of any business. If
your COS>NS, why go business?
Base on chart posted above, on 2008, PGOLD was earning P7 for every P100 of
their Sale. The P93 went to your puhunan/COS.
Notice now how they have been improving on their GPM. From P7, they are now
earning almost P15 for every P100 sale.
After GP, we need to deduct OPEX(Operating expense). These are the common
exp like salaries, rent, deprecation etc.
It is good to see that while Sales & GP are going up, OPEX remains constant
at only 11% of NS.
NI (Net Income)
NI = Net Sales – all cost & expenses + other income
Return on Sale(ROS) = NI/NS
On 2008 & 2009, we can see that ROS is only <1% of NS, then improves to
1.75% on 2010, but now it multiplies more than twice of 2010 and has
reached 4%. Isn’t that a big improvement?
The chart posted below is the Actual NI of PGOLD on 2008 to Sept2011
(9M2011) and some estimates. Amounts are in Millions.
As of Sept2011, NI of PGOLD already doubled the full year 2010 income. I believe PGOLD will more than TRIPLE its Net Income this year compared to 2010. The xmas is nearing, 13th month pay & bonuses are given to employees. Retails will benefit from this as employees have much more to spend this season.
Prior to IPO, they have only 72 stores and the latest news from bloomberg says that it is opening its 100th store on Dec 19. http://www.bloomberg.com/news/2011-12-09/puregold-on-track-to-hit-2012-profit-target-shares-rally-1-.html
If this year the NI will triple the previous year, what more if we can see the 100 stores fully operational on next year. Plus they will also add 22-25 more stores next year. 2.4B estimate of Gus is not impossible. I think his estimate is still conservative.
Breakdown of Assets
Some may argue or will be disappointed that there was a significant drop in
percentage of Cash over total Asset.
But did you know that this is also a good indicator because too much cash
is not good for business. The company needs to utilize cash. What’s the use
of cash if they are not earning?
Better invest it or put that in operation. From the chart above, we can say
that their cash was invested in PPE, maybe construction of some warehouse
and supermarkets; and in Inventory.
This only signifies that the company is serious on expansion and has
loooooooooooooong way to go.
Look how they managed their debt. From a significant portion of 8.85 of
Equity…down to only 2.24.
Others are self explanatory.
MSCI PE average for consumer stocks is 21x and will likely remain given the
state of the global economy
Net Income 2012E of Gus is 2.4B
PGOLDs outstanding shares is 2B
Earnings Per Share
2.4/2B = 1.20
“MSCI PE average for consumer stocks is 21x and will likely remain given
the state of the global economy. ” – From Gus’ Blog
If we put the figures together, we can get the value of PGOLD at 25.20(1.20
x 21) on 2012.
Gus’ TP is 24.
Overall FS Analysis
9M2011 = Jan-Sept2011
Sources: PGOLD’s prospectus(before IPO) & 17Q from PSE ; http://guscosio.com/wordpress/?p=541