UPSON International Corp. (UPSON) is the leading IT retailer in the Philippines with a broad range of tech products. In the first 9 months (9M) of 2022, the firm\u2019s net income soared by 69% year-on-year (y\/y) to P400.23 million on the back of its revenues which likewise grew by double digits totaling P7.03 billion. The surge in sales could be largely attributed to the 17 newly opened stores in 2022 as well as the decline in its finance costs. <\/p>\n\n\n\n
As for its IPO, the firm offers 625 million common shares with an over-allotment
option of up to 62.5 million. The proceeds of the IPO would be used for the
retailer\u2019s store network expansion and general corporate purposes. In the
next five years, the company seeks to have a total of 250 stores or more
25,000 sqm retail space for more revenue gateways. Moreover, the company
would put up additional warehouse facilities across principal cities to refine
its logistics network and sustain uniform product prices nationwide.<\/p>\n\n\n\n
Based on our analysis, the company is fairly priced at its offer price of P2.40 per share. UPSON is a company operating in higher returns with lower financial risk.<\/p>\n\n\n\n
The offer and IPO proceeds<\/strong><\/p>\n\n\n\n UPSON will be offering 625 million common shares with an over-allotment option of 62.5 million for P2.40 apiece. UPSON\u2019s final offer price of P2.40\/share was -56% lower than the P5.50\/sh maximum offer price the firm previously announced.<\/p>\n\n\n\n Of the estimated P1.50 billion proceeds, the firm intends to use all of its proceeds on its store network expansion. UPSON seeks to maintain its leading position in the industry and aims to further expand on areas with high sales potential that are often overlooked.<\/p>\n\n\n\n Latest earnings report<\/strong><\/p>\n\n\n\n Historically, the tech retailer has consistently grew its revenues with its brand portfolio covering more than 13,000 SKUs and with its strategic store locations. In 2021, the company\u2019s topline rose by +5.10% y\/y to P8.57 billion, while bottomline spiked by +95.24% y\/y to P403.64 million which could be largely attributed to the surge in demand in IT-related products along with the rise in BPOs, hybrid office setup, and e-learning.<\/p>\n\n\n\n Store network<\/strong><\/p>\n\n\n\n The firm intends to grow its store network in the next five years, targeting 250 stores by 2027 or an additional 25,000 sqm of retail space. Based on the prospectus, the company has 200 stores as of September 2022 \u201464 located in NCR, 41 in Mindanao, 37 in South Luzon, and 34 in North Luzon. This intent of expansion would widen the retailer\u2019s consumer base, thus, could result in better sales performance in the subsequent years. Using its historical figures, UPSON seems to have P46 million sales\/store in FY21, and our house forecasts that this could further surge to P47.44 million and P47.88 million sales\/store in 2022 and 2023, respectively.<\/p>\n\n\n\n Industry update <\/strong><\/p>\n\n\n\n Internet users over the last years surged as the world gradually embrace the digital space. During the pandemic, the consumer electronics industry boomed even further as consumers purchase laptops, computers, and other gadgets amid the adoption of WFH and e-learning set-up and this then generally resulted to consumers becoming more tech-savvy. Here in the Philippines, there has also been a rise in the number of data centers which requires several tech products and this bodes well to the company\u2019s growth prospects.<\/p>\n\n\n\n Presence in e-commerce<\/strong><\/p>\n\n\n\n Since the pandemic started, the digital economy has been steadily growing as consumers find ease of e-commerce. UPSON has their own online channel with its company website and has ventured in using e-commerce platforms such as Shopee, Lazada, and Pick-a-Roo to make their products within their customers\u2019 reach. The company however noted that the contribution of its online business category was only <1% of their total sales as consumers usually opt to go at their physical stores when buying highly priced items.<\/p>\n\n\n\n