Philippine Stock Market Research

Finally, a Home-Improvement and Construction Supplies Retailer Stock in the PSE!

March 30, 2017

Wilcon Depot, Inc. (WLCON) is the leading home-improvement and construction supplies retailer in the Philippines.  WLCON currently has 30 depots and six Home Essentials stores nationwide.  Depots contribute 96% of revenues and carry 2,000 brands.  WLCON has a 56% market share of depots in the Philippines.

WLCON is embarking on a nationwide store expansion and cutting down on debt.  Using bulk of its IPO proceeds, WLCON plans to open eight stores in 2017 and targets 29 new stores in the next five years.  WLCON will likewise pay PHP972 mn in debt after its IPO enhancing its earnings in 2017.

WLCON will have a cash-rich balance sheet after its IPO.  Even before its IPO, WLCON already has a rare positive net working capital as inventory forms bulk of its assets.  WLCON is a growth play.  Fueling WLCON’s earnings is its nationwide expansion.  It has a premium to 2018F market values but at a discount to PEG and fair value.

Weighing down on WLCON are rising interest rates.  However, the Philippines has a 4 mn housing backlog with new demand of 300,000 homes annually.  Home improvements are year-round and continuous activities, and this will buoy WLCON’s earnings.  WLCON is seen breaching the PHP1 bn net income mark in 2018 as it pursues its expansion.



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