PUREGOLD PRICE CLUB, INC - Company Presentation - BAML / PSE Philippines Corporate Day February 2, 2012
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Sa , Always Panalo! PUREGOLD PRICE CLUB, INC. Company Presentation - BAML / PSE Philippines Corporate Day February 2, 2012
Disclaimer
These presentations and/or other documents have been written and presented by Puregold
Price Club, Inc. (PGOLD). PGOLD is solely responsible for the accuracy and
completeness of the contents of such presentations and/or other documents. Bank of
America Merrill Lynch and the Philippine Stock Exchange do not have any responsibility for
or control over the contents of such presentations and/or other documents. No
endorsement is intended or implied notwithstanding the distribution of the presentations
and/or other documents at the Bank of America Merrill Lynch / Philippine Stock Exchange
Philippines Corporate Day. The materials and information in the presentations and other
documents are for informational purposes only, and are not an offer or solicitation for the
purchase or sale of any securities or financial instruments or to provide any investment
service or investment advice.
2
Sa , Always Panalo!
4.
1. Operation
Company Highlights
Overview
Business vision and mission
“To be the most customer-oriented hypermarket offering one-stop shopping
convenience and best value for money to our Customers”
Sa PUREGOLD, Always Panalo!
The mission of our company is to:
Commit to profitable growth and results for our stockholders
Provide products, services and business opportunities to every Filipino family
Establish lasting relationships with our suppliers and business partners
Strive to promote the personal and professional development of our employees
4
History and development
Number of retail outlets 150
125
100
62
41
30
16 20
1 3
1998 2001 2006 2007 2008 2009 2010 2011 2012 Target 2013 Target
First store Expansion Brand recognition Market leadership Rapid and continuing expansion
• Opened in • Launched loyalty program in 2001; • Reader’s Digest • The 2nd largest • 2011 saw the highest number of
Mandaluyong renamed as Tindahan ni Aling Puring Asia’s “Most hypermarket and store openings in Puregold’s
City, Metro Manila in 2004 Trusted Brands” supermarket history with the launch of 38
• Between 2002 and 2006, Puregold retailer in the new stores
launched an average 3 new stores Philippines in • Retail Asia’s one of Top 500
every year and expanded operations terms of net sales Retailers in ASPAC region
in North and South Luzon
First format New format New format
introduction introduction introduction
• Targets to open 25 new stores
in each of 2012 and 2013
Rapid store expansion from 1 to 100 stores in 13 years
5
Multiple store formats
Format Hypermarket Supermarket Discounter
No. of stores 61 28 11
Net selling area (sqm) 184,773 25,436 4,528
Avg. net selling space (sqm) 3,029 908 412
Supermarket
(Junior)
11.7%
Hypermarket (Price
Revenue contribution1 club) Minimart (Extra)
86.7% 1.7%
No. of stock-keeping unit (SKU) 30,000 – 50,000 Up to 8,000 1,500 – 2,000
Average net ticket (PHP)1 625 332 331
Close proximity to major intersections
Location Residential area Residential area
and transportation hubs
Retail consumers (65%) &
Customer target Retail consumers Re-sellers and retail consumers
re-sellers (35%)
Non-food
Non-food Non-food
20%
26% 25%
Wide Product Distribution1
Food Food
74% Food
75%
80%
Note:
6
• (1) As of 30 September 2011; Other data as of 31 December 2011
Established store presence in Metro Manila and Luzon area
Key statistics Geographic coverage
No. of stores • 100 BULACAN Caloocan
• 31 cities and 23 North Luzon
Presence in (16 stores) Valenzuela
municipalities
Luzon Quezon City
Net selling area • 214,737 sqm Navotas Malabon
Caloocan
Metro Manila Marikina
(53 stores)
61 San Juan
South Luzon Manila
(31 stores)
Mandaluyong RIZAL
Number of retail outlets Pasig
17 Manila Bay
Makati
Pateros
Visayas
12 Pasay Taguig
28
Parañaque
6
3
32 11 Mindanao
Las Piñas
19 8 Laguna de Bay
1
2 Muntinlupa
CAVITE
LAGUNA
Metro Manila North Luzon South Luzon Area with Puregold store coverage
Note:
7
• As of 31 December 2011
Unique business model focusing on both retail customers &
re-sellers
Retail consumers 2010 Philippines retail sales breakdown Re-sellers
• Comprises mass-market household Modern food • Comprises wholesalers, small to
consumers (Class C/D) retail (1) medium sari-sari stores, canteens,
21%
restaurants, convenience stores and
• Target demographic represents over
drug stores
2 million households
• About 170,000 business owners
• Avg. monthly income: PHP 8,000 –
registered within the Aling Puring
50,000
Serves customers in loyalty program
• Avg. basket size / shopping trip: PHP both segment
• Avg. basket size / shopping trip: PHP
700 – 5,000 Traditional retail
79%
3,000 – 50,000
• Frequency: 2x – 4x per month
• Frequency: 1x – 3x per week
3Q2011 Puregold customer by revenue
Re-sellers
35%
Retail
consumers
65%
Source: Planet Retail
Note:
8
• (1) MGD Total
Sa , Always Panalo!
2.3.Key
KeyInvestment
Investment Highlights
Highlights
Key investment highlights
1 Leading hypermarket and supermarket operator in the Philippines
2 Well recognized brand and strong customer loyalty
3 First retailer to launch wholesaler loyalty program
4 Multi-format, efficient and scalable business model
5 Established relationships with key business partners
6 Advanced management information systems
7 Strong and experienced management team
Unique pure-play hypermarket and supermarket operator
101
Leading hypermarket and supermarket operator in the
Philippines
Second largest modern food retailer in the Philippines Modern food retail sales of Hypermarket sales of
Philippines Philippines
2006 vs 2010 banner sales in PHPbn PHPm PHPm
05-10 CAGR: 15.5% 05-10 CAGR: 21.0%
79 10-12 CAGR: 11.3% 10-12 CAGR: 28.3%
1087.4 152.2
878.6
91.3
426.2
34.8
2005 2010 2012E 2005 2010 2012E
31 32
Huge growth potential
25
3.7x
21 Sales area (sqm) per thousand habitants
2010 hypermarkets density
14 126
10 10 8
2006 5 5 6
62 59 49
2010 29 18 7
Uniwide Benison Robinsons Rustan's Puregold SM Retail
Group
2010 sales Japan South Malaysia Taiwan Thailand China Philippines
60,000 51,000 111,000 140,331 282,000 700,746 Korea
area (sqm)
2006 sales
60,000 36,000 78,000 126,998 78,000 310,500
area (sqm)
Well-positioned to capture the rapid growth of modern food retail
Source: EIU, Planet Retail
11
Notes:
• US$ 1 = PHP 43.4942 Well-recognized brand and strong customer loyalty
Unique value driven brand Attractive strategic partner
Best value-for-money Joint marketing arrangements
Convenience Anchor tenant arrangements
Enjoyable one-stop shopping Drawn the most renowned tenants
experience
Trusted
Brand value widely recognized by media and research firms
Philippines’ “Most Trusted Brands” Ranked #4 among all Philippine Ranked #1 relative to its
by Reader’s Digest Asia Trusted retailers competitors for Accessibility,
Brands Survey in 2008 Value for money and Availability
Top 500 retailers in Asia Pacific in of stock in 2010
2010 & 2011
Solid brand equity and loyalty to facilitate future expansion
123 First retailer to launch reseller loyalty program
The Tindahan Ni Aling Puring loyalty program (TNAP)
Estimated # of sari-sari stores: 770,000
First and only hypermarket
retailer with customized
membership program for re-
sellers
6x growth in 180,000
membership in
Ability to reach customers 6 years
serviced by more than
30,000
170,000 sari-sari stores and
other small businesses
2005 2011
TNAP benefits include…
Barangay Insurance Free Hong
Up to 3% Store dress- Participation
Free training Asenso: coverage for Kong Trip for
rebate on Free delivery up and in yearly
and seminars Outreach top 1000 TNAP top 10 TNAP
purchases merchandising convention
Program members members
Unique business model targeting a broad customer base
134 Multi-format, efficient and scalable business model
Multi-format Flexible model of distribution
Flexibility to penetrate Small
different market supplier
segments
Ability to customize Small Cross Large
according to Direct suppliers
supplier dock
demographics and
availability of real-estate
Small
supplier
Flexible store expansion strategy
Outsourced human resources
Net selling space
Flexible expansion by
Owned acquisition or leasing
27% Strong support for
Focused on site location newly developed
Ability to quickly expand region
and scale-up operations Limited overhead for
Leased Intention to have higher new expansion
73% proportion of owned
stores
Highly flexible model facilitates rapid store expansion to cater for different markets
145 Established relationships with key business partners
Diversified supplier base with focus on building stable, long-term relationships
Over 1,500 domestic and multinational suppliers Over 10 years of relationship with half of the suppliers
20%
50%
30%
10 yrs 5 yrs 2 yrs
Suppliers keen to trade with Puregold and offer favorable terms Key tenants / Business partners
Supplier discounts After-sales service
Efficient and punctual delivery Limited inventory risk
Stable supplies Promotion partnerships
Strong relationship with suppliers and partners enables Puregold to maintain competitive pricing and drive traffic
156 Advanced management information systems
Store level
Real-time transmission of sales
data, products-in-stock and
inventory levels to Headquarters
Cross-docking In-house IT Dept Customers
Combination of 3rd
Link up with supply chain service party service provider Tracking of customer trend and
provider ACE LOGISTICS and in-house
adjust product mix
development
Suppliers
ACE: integrated
with 80 suppliers
Automated stock replenishment
system
Advanced management information systems enable real time monitoring and management of stores
167 Strong and experienced management team
• Director and the Chairman of the Company since incorporation in September
Lucio L. Co 1998
• An entrepreneur for the past 40 years
Experienced and professional
• Director and the Vice Chairman and Treasurer of the Company since management team with years of
Susan P. Co
incorporation retail experience in the
Philippines
• Director and the President of the Company since 1998
Leonardo B. • Previously employed with Ayala Investment and Development Corporation as
Dayao Vice-President from 1980 to 1984 and Bank of the Philippine Islands as Vice
President from 1984 to 1994
Instrumental in establishing the
• Senior Vice President; employed with Puregold since 1999 second largest retailer in
Iraida B. de
Guzman • Previously employed with Royal Duty-Free Shops, Inc. and Rustan’s Philippines in less than 13 years
Supercenters, Inc. (Shopwise) from 1993 to 1999
Marissa delos • Senior Manager of Accounting of the Company
Reyes • Previously worked at Isetann Department Store
Developed a chain of 100
stores in a time span of 13
Denise Maria • Vice President for Administration since 1999 years
Carolino • Previously served as Purchasing Manager at Uniwide
• Financial Comptroller
Erlinda G. Orro • Worked in various companies including Gregorio Araneta Management
Key team members with the
Corporation, Kuwait Airways, SyCip Gorres Velayo & Co.
company since inception
Andres S. • Legal Counsel of the Company since 2005
Santos • Worked in Jose S. Santos, Jr. Law office and Fontana Development
Management team largely composed of the founding members
17Sa , Always Panalo!
5. Financial
3. Financial Summary
SummaryOverview of financials
Revenues Gross profit
PHPbn PHPbn
3.9
29.1
26.9 3.5
24.1
19.8 2.5
18.8
2.2
14.6%
1.4 12.1%
9.2% 12.8%
7.4%
FY 2008 FY 2009 FY 2010 3Q 2010 3Q 2011 FY 2008 FY 2009 FY 2010 3Q 2010 3Q 2011
Gross profit Gross margin (%)
• Strong revenue growth driven by strong store roll out
• Reach critical mass therefore receive stronger support from suppliers in terms of discount and rebates
• Gross margins have improved from 7.4% to 12.1% in 2010
Notes:
Puregold Junior results were consolidated from 2H 2010 onwards
19Overview of financials (cont’d)
Selling expenses General and administrative and Other operating expenses
PHPm PHPm
2,696 9.6% 9.4%
9.1% 2,522
8.6%
9.3%
2,082
1,890
1,711
2.2% 2.1% 2.1%
1.9%
1.5% 631 572
464 417
275
FY 2008 FY 2009 FY 2010 3Q 2010 3Q 2011 FY 2008 FY 2009 FY 2010 3Q 2010 3Q 2011
Selling expenses % of revenues Other operating expenses % of revenues
Notes:
Puregold Junior results were consolidated from 2H 2010 onwards
20Overview of financials (cont’d)
Operating income Net income
PHPm PHPm
1,078
1,577
985
777 510
5.9% 378
458
3.9% 4.0%
297 3.4%
1.9% 129 131 1.8%
1.6%
0.7% 0.5%
1.9%
FY 2008 FY 2009 FY 2010 3Q 2010 3Q 2011 FY 2008 FY 2009 FY 2010 3Q 2010 3Q 2011
Operating income Operating margin (%) Net profit Net margin (%)
Notes:
Puregold Junior results were consolidated from 2H 2010 onwards
21Working capital
Stable working capital days
44.8
41.7 41.5
34.3
31.0 31.5
3.6 3.6 2.7
FY 2008 FY 2009 FY 2010
Trade receivables turnover days Inventory turnover days Trade payables turnover days
Notes:
• Average of inventory at the beginning and end of the period / cost of sales x 365
• Average of trade receivables at the beginning and end of the period / net sales x 365
• Average of trade payable at the beginning and end of the period / cost of sales x 365
22Capital expenditure
Capital expenditure
PHPm
3,022.6
2,270.0 FY11 budget: 2,214
1,726.8
1,309.0
870.0
FY 2008 FY 2009 FY 2010 3Q 2011 FY 2012E
23Sa , Always Panalo!
6.4.Business
BusinessStrategy
StrategyGrowth strategy
1 Expand operations in existing markets as well as the Visayas and Mindanao regions
Continue to focus on price competitiveness through leveraging scale and operating
2
efficiencies and by continuing promotional activities
3 Further develop and increase awareness of the Puregold brand
4 Continue to use advanced IT systems to manage product assortment
5 Continue to attract customers by improving and renovating stores
6 Continue to build on synergies with key partners and customers
25Winning Customers
Winning People
Winning Stakeholders
Sa Puregold, Always Panalo
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