FREE Stock in Focus: WLCON (3 Apr 2017) by AP Securities

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Summary of Brokers’ Recommendations for this stock
Stock Code Company Buy Hold Sell Brokers' Average Target Price Closing Price on 30 Mar 2017 Potential Profit % Brokers' Highest Target Price Brokers' Lowest Target Price
WLCON Wilcon Depot Inc. 1 0 0 6.22 5.33 16.70% 6.22 6.22



Our Partner Broker’s Analysis and Opinion
AP Securities  BUY 6.22 3 April 2017


Rise of the Home Builder

WLCON, Philippines’ biggest home improvement chain, listed its shares with the PSE last Friday. The PHP 7.0 billion offer priced at PHP 5.05 per share is said to be more than 6.0x oversubscribed according to one of the underwriters.

Based on our estimates, WLCON will trade at a 2017 P/E of 29.5x and EV/EBITDA of 13.6x, in line with foreign comparables. We are excited for this IPO since this will be the first this year, thus giving us some direction as to how will the next IPOs (Bermaz Auto, Cebu Landmasters, Audiowav, Eagle Cement, Xeleb, The Big Chill, Pure Energy) slated be received by the market.


Robust Household Formation

For the past six (6) years leading to 2015, household formation grew at a CAGR of 3.5%, almost double the population growth of 1.8% in the same period. We believe this expansion will be sustained due to:

(a) rising disposable income;

(b) continuous urbanization outside Metro Manila; and

(c) pressure in closing the housing gap of 5.5 million units as of 2016.


Committed to Expanding Operations

WLCON aims to expand its Depot Format, to be partially funded by 80% of the IPO proceeds. It will add 28 more stores in its network for the next five years, with focus on growing its presence outside NCR. We expect this expansion plan to be a key driver of earnings growth going forward, albeit possibly a short-term drag on margins due to front-loading of expenses. Also, we do not discount the fact that there may be execution risks going forward as WLCON has only opened average two stores every year.


Our Partner Broker’s Recommendation

As there is brisk demand on the offer, we expect a possible squeeze play which may result to a run-up in price for the first few days after listing date. Nevertheless, we have a Target Price of PHP 6.22 per share for WLCON, an upside of 23.2% from the offer price.

Our long-term BUY outlook is hinged on: (a) household formation continuing to grow faster than population growth, enabling WLCON to keep earnings growth at an estimated CAGR of 13.3% for the next five years, above its peers in the consumer discretionary space, and (b) execution of its aggressive 5-year expansion plan.


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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.