Special Report FREE Preview: Wilcon Depot (WLCON) IPO Analysis #1 (by AP Securities)

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Wilcon Depot (WLCON) IPO — Our Partner Broker’s Analysis

SUMMARY OF ANALYSIS AND RECOMMENDATION

WLCON: The Industry Market Leader

Wilcon Depot, Inc. (Stock Ticker: WLCON) is a home improvement and construction supplies retailer founded by William T. Belo in 1977. As of 2015, it is the leading depot in the Philippines in terms of value sales amounting to PHP 14.5 billion, a 56.0% market share.

WLCON operates in two (2) store formats: Depot Store and Home Essentials Store Format. This dual format offering enables WLCON to maximize its coverage and allows for better penetration of its target market segments – the Class A and B consumers as well as institutional accounts.

As of the 3rd Quarter (3Q) of 2016, WLCON operates 36 stores nationwide, with 17 of its branches strategically located in Metro Manila. Aside from its wide geographic presence, WLCON also offers an extensive array of products under 2,000 local and international brands. With its 40 years experience in the industry, strong brand recognition, complete product line, and well-established foothold, WLCON is set to capitalize on its market leading position to further increase scale and operations.

 

Expansion Plans Are …

WLCON plans to use 80.2% of the IPO proceeds to expand its store network. The Company aims to open …

From 2013 to 2015, WLCON posted stable results, with net sales and earnings growing at a CAGR of 10.4% and 49.7%, respectively. Growth is driven mainly by strong same-store-sales growth at an average of 5.0% to 6.0%, and continuous expansion with the opening of an average two (2) stores every year.

Moving forward, we expect WLCON to …

 

The indicative offer price range is set at PHP 5.00 to PHP 5.68. On Friday, March 17, Wilcon Depot announced it is pricing its initial public offering at P5.05 per share.

At this price, WLCON will be trading at …

Using the Discounted Cash Flow (DCF) method, our forecasted equity value Target Price per share is …

Therefore, our recommendation: ????

Our Target Price implies 2017 P/E of 31.6x and EV/EBITDA of 15.0x. Sound fundamentals and brisk demand on the offer may result to a run-up in price. Downside risks include the potential rise in interest rate which may affect demand from the real estate market, and possible delays on the store network expansion plans.

 

INVESTMENT HIGHLIGHTS

With over 40 years of experience in the industry, strong brand recognition, complete product portfolio, and well-established foothold nationwide, WLCON is primed to capitalize on the continued positive outlook of the home improvement sector.

WLCON plans to use 80.2% of the IPO proceeds to aggressively expand in the next five (5) years. It plans to open …

The noticeable dip in revenues and net income in 2014 is due to the port congestion. Also, in the same year, WLCON management decided to be conservative in realizing bad debts which led to higher operating expenses.

From 2016 to 2018, we expect net sales to …

 

VALUATION HIGHLIGHTS

Using the Discounted Cash Flow (DCF) method, the forecasted equity value for the Company is ???, which translates to an equity value Target Price of ???.

 

Our Partner Broker’s Recommendation

Our recommendation: ????? …

 

Key Risks

The potential rise in interest this year may result to higher borrowing costs and thus a slowdown in demand for properties. WLCON, being a home improvement and construction supplies business, is dependent on the growth and performance of the real estate sector. Any slowdown in the property market growth may significantly affect the demand for WLCON’s products.

The key growth strategy for WLCON is to successfully open new stores and operate those on a profitable basis. However, it has encountered some delays in the past due mainly to construction delays, failure to obtain permits, or the availability of prime location for its stores. As such, these delays could happen in the future and affect the growth strategy of the company.

 

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AP Securities (formerly Angping & Associates Securities)
AP Securities (formerly Angping & Associates Securities)

AP Securities (formerly Angping & Associates Securities) is one of PinoyInvestor’s partners in delivering superior and reliable stock research reports that help Filipino investors make smart stock investing decisions! Learn more about them here.