13 Sep 2017 / by Unicapital Securities
Special Report: Consumer Sector Update, with Target Prices for PGOLD, JFC, PIZZA, URC, MAXS (Sept 2017)
UPDATE (Oct. 6, 2017): PIZZA and PGOLD proved to be good top picks as they registered price increases of +6.3% and +5.51%, respectively, in just one month! Read the Performance Report by clicking the image below.
Our Partner Broker’s Analysis
Input costs to rise with higher inflation
Inflation has been trending higher this year compared to last year, driven by higher food and oil prices. Inflation averaged at 3.1% for the first 8 months of 2017 and is double the 1.5% of the same period in 2016. Given this, we expect input costs of consumer companies to increase as well.
Overcoming higher inflation relies on company’s ability to pass it on to consumers
A simple way to identify which companies were able to cope with inflation is to check if their sales revenues grew faster or at least on par with the growth of their COGS.
PIZZA and PGOLD were the top performers in this aspect. PIZZA’s revenue growth was faster by 1.3% points more than its COGS growth while PGOLD’s sales growth was 0.5% points faster than the increase in its COGS. JFC comes in at third, as its revenue growth barely kept up with the increase of its COGS.
URC and MAXS, on the other hand, saw their revenues grow slower than their COGS.
Top performers are PGOLD and JFC
PGOLD and JFC have rallied strongly since we released our initiation reports last June 2017. PGOLD is now trading at PHP 51.70/sh while JFC is trading at PHP 244.00/sh. We’re reviewing our Target Prices and rating for the two since potential upside in both stocks are now below 10%.
Our Partner Broker’s Recommendation
(Originally published on September 13, 2017)
PGOLD and PIZZA as top consumer picks
We like PGOLD since it could be the overall winner under a new tax regime. At the same time, we reiterate our Buy rating on PIZZA given its very strong profitability.
We believe that both stocks are not yet fully appreciated by the market since they have the lowest 2018 P/E in the industry.
Summary of Recommendations and Target Prices:
Puregold Price Club (PGOLD) – Buy, Target Price of PHP 55.01
Jollibee Foods Corp. (JFC) – Buy, Target Price of PHP 261.36
Shakey’s Pizza (PIZZA) – Buy, Target Price of PHP 16.40
Universal Robina Corp. (URC) – Hold, Target Price of PHP 151.64
Max’s Group, Inc. (MAXS) – Hold, Target Price of PHP 19.76
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