Oct 22, 2014 – #SSI – Specialized Retail at 40% Discount (Well Worth Your Time, Shoppers Unite!)

Stores Specialists Inc. (#SSI) is going to list this coming November 7, 2014.  To spare you the time in reading the prospectus, here’s a summary to help you decide on this 😀

Firm Offering: 864,225,503 common shares (695 Mil shares primary (for the company), 168 Mil shares secondary (i.e. Pres. Anthony Huang and others keep the cash)

Offer Price: 7.50 (Note that this is a 40% slash discount from previously “talked about” price of P12.50)

Joint Global Coordinators and Bookrunners: BPI Capital, Credit Suisse and HSBC

Firm shares will represent approximately 26.1% of total issued outstanding shares. (This refers to the float)

Overallotment or Greenshoe option : 129,633,826 shares at offer price

Total Net Proceeds (This is what goes into capex) – Approx Php4.8 Bil to company after deduction of estimates fees and expenses

Total Take of Secondary Share Selling  (i.e.this doesn’t go to company but only to owners) – Approx 2.09 Bil assuming full exercise of over allotment option.

Institutional Take Up (70% or 604M shares)

Retail Take up (30% or 259M shares)


Who is #SSI? Let’s round up with their famous brands.  103 famous brands.  Mid-to upper tiers of the Domestic Consumer Spectrum.  Blair Waldorf and fashionistas know this fully well. 

Branded Goods, 655 stores within 68 malls across the Philippines (Luzon, Visayas, Mindanao with total gross selling space of 111,585 sqm) 

Designer Brands : Hermes, Gucci, Salvatore Ferragamo, Michael Kors, Kate Spade, Marks &Spencer, Givenchy, Giuseppe Zanotti, Issac Mizrahi, Longchamp, Alexander McQueen, Cortefiel, Burberry, Christian Dior, D&G, Versace, Paul Smith Junior, Jean Paul Gaultier, Chloe, Fendi, Louis Vuitton, Stella McCartney, Chloe, Missoni, 7 for all Mankind, Armani Exchange, Calvin Klein Jeans, Tommy Hilfiger , Bally, Tods, Furla, Jimmy Choo, Bottega Veneta

Apparel and Accessories : Zara, Bershka, Stradivarius, Massimo Dutti, Pull and Bear

Casual Wear: Lacoste, Banana Republic, Old Navy, F&F, Aeropostale and Gap

Food and Beverage: TWG, Oliviers and Co.

Travel and Luggages: Samsonite

Trendy Footwear: Payless Shoesource, A2 by Aerosoles, Acca Kappa,

Home Furnishings: Muji and Pottery Barn

Convenience Stores: Family Mart

Personal Care and Home Solutions: Beauty Bar, MakeRoom, Clarins, Diptyque

Well Worth Department Store

2014_05_lifestyle_wellworth 10

Learn more about their department store here:

1.) http://ph.hola.com/lifestyle/wellworth-department-store-opens-in-manila.html

2.) http://www.clickthecity.com/shops-services/a/22184/wellworth-department-store-now-open-at-fairview-terraces-quezon-city

Page 116 and 117 – Insert Full Brands Listed Under #SSI


Facts and Figures:

Net Sales 10,183 Mil from 2011 to 12,788 Mil in 2013 (CAGR of 12.1%)

Net income 264M in 2011 to 614 Mil in 2014.  1H14 income is 486 Mil (CAGR of 52.4%)

Gross Profit Margins

2011- 40.1%

2012 – 43.9%

2013 – 49.2%

1H2014- 56.8%


History :

Rustan’s group started 1951.  SSI strated in 1987 developing stand alone specialty stores for diverse range of international brands in the Philippine market.

Highly Experienced Management Team:

Mr. Anthony T. Huang (President) with Rustan’s Group and Tantoco family heritage

Merchandising Group have extensive 20 year average industry experience and veterans of their fields.


1.) 158-188 new store openings for 2014 (so far 67 has been rolled out as of 1H14) This will increase total gross selling space by approximately 40K sqm

2.) Open 100-115 new stores for 2015 to increas GLA by another 16,000 to 19,000 sqm

80% Manila, 10% Luzon (excluding Manila), 6% Visayas and 4% Mindanao

3.) Expand Family Mart and Well Worth Department Store – Total of 150-175 Family Mart by end of 2015 (so far there are 46 Family mart as of 1H14) + 1 Well Worth Department store next year

Page 28,32 Snapshot of Financials 

(Insert Picture here)



Highly Dependent on Consumer Spending (hence highly correlated with economic growth)

Competition (Note that #SM just brought H&M, Uniqlo to name a few; #RRHI owns Dorothy Perkins, Topshop to name a few.  Bench group owns Cotton on)

Capex Difficulties on first year starts- There is no assurance that every Family Mart is profitable.  There is no assurance that expansion is equivalent to profitable operations.  There are logistical, operational risks involved in opening stores.

Retail Brands are subject to Mall Rentals.  All are leased to mall operators (i.e. #SMPH, #ALI) hence any significant rise in business growth can be disrupted due to high rental leases.

Truck Ban sensitive – In February 2014, the company suffered reduced sales due to port congestion.

All Stores are Philippines, thus any significant downturn in general economic conditions will result into loss of sales and hence loss of income. (well it affects all retail anyhow)

Almost all are imported hence EURUSD is their major forex cost.  It’s good EURUSD is now 1.27 because they can significantly earn a lot with a falling Euro and with Mario Draghi announcing more stimulus for Europe.


Exact Use of Proceeds

1.) Specialty Retailing: Php2.5 Bil

2.) Family Mart P146 Mil

3.) Wellworth – P253 Mil

4.) Pay Debt – P1.5 Bil (Creditors are #BDO, #SECB and #CHIB who lent money to them at 3.5%-4.75% interest rates)

**** Total is Php4.8 Bil


Revenue Breakdown:

Net Sales:

1.) Luxury 22.7%

2.) Casual 18%

3.) Fast Fashion 32.9%

4.) Footwear, Accessories and Luggage 13.7%

5.) Others 12.7%


Conclusion:  You shop in these stores.  You buy the clothes.  You buy here every single time.

Market Capitalization is Php25 Bil  (Too cheap to ignore)

Demand for these luxury goods are gonna be common.  Brand conscious Filipinos, especially when middle class is rising will only grow further.  With 50% margins, EURUSD possibly going down to 1.25 or so for next year, the company if it can earn P1 Bil for next year isn’t expensive versus the brand, management and capability.  Previous P12.50 might have been ghastly pricing which was why they lowered it down to P7.50 but this is too low for the company.  More upside versus downside. 😀  Target?  I’m guessing (just a guess that this can trade at a 30X multiple so around 9 bucks per share at the least mainly coz margins are growing accompanied with the rise in sales) 😀

This is to put it bluntly “THE LEADER” in Branded Goods.  If you want Retail and branding, you go Stores Specialists.

Brand centric mga pinoy.  The more money, the more you will buy branded goods.  This is the best stock to play the “rising middle class Filipinos” phenomenon.

Christmas bells are ringing too.  Shopping Season 😀

– Faceless Trader
Pictures to accompany the facts above




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