Stock In Focus: SSI Group Inc. ($SSI)

The specialty retail store arm of Rustan, SSI Group Inc. (known as $SSI) had an IPO at P7.50 per share last November 2014.  Two investors had a big chunk of the share like GSIS and BPI.  The company, which includes Stores Specialists, Inc. as part of its group, retails 103 international brands including Hermès, Prada, Gucci, Burberry, Salvatore Ferragamo, Lacoste, Michael Kors, Kate Spade, Gap, Old Navy, Zara, Stradivarius, Bershka, Aeropostale, Samsonite, Nine West, Payless Shoe Source, Beauty Bar, Marks and Spencer, Pottery Barn and TWG, amongst others. The Company is also developing, managing and operating convenience stores through the FamilyMart chain. It recently opened its first Wellworth in Ayala Land’s Fairview Terraces.

The stock, SSI has been battered by the external factors such as the negative sentiment of the global market, as well as due to 38% decline of 3rd quarter net income from 187.3M in 2014 to 115.25M in 3Q2015 although its net income for 9 months was P701M, a 4% increase year to year. The stock had reached to its 52-week low of 2.38, slowly recovering to 3.28 as of Feb 12, 2016.  Surprisingly, due to exaggerated negative sentiment of the stock, it’s already near to its book value at 2.90 per share excluding its future potential growth.

With the result of the IPO in the last quarter of 2014, net proceeds have been slowly disbursed as per below: (source: edge.pse.com.ph)

SSI disbursement

Future Growth Potential:

  1. The future growth of SSI is newly acquired 50% of Landmark Management Services, Ltd.  Landmark has supply and management agreements with Duty Free Philippines Corp. (DFPC) for fashion and accessories. It operates  off-airport stores in Fiestamall, NAIA Terminals 1 and 2, and Mactan International Airport.
  2. SSI has also entered into a deal to bring to the Philippines Joe Fresh, one of Canada’s leading fashion retailers. It is a franchise partnership with Loblaw Companies Ltd and its affiliates, the owners of Joe Fresh, to open free-standing Joe Fresh stores in the local market starting first half of 2016.
  3. Another future growth is the joint venture with Ayala which is the FamilyMart Stores and Wellworth Department Stores with the growth of gross selling space of 21.8% as of 3rd quarter 2015.
  4. As of Sept 2015, the group’s brand portfolio consisted of 115 brands, composed of 46 luxury and bridge brands, 13 casual wear brands, 11 fast fashion brands, 24 footwear, accessories and luggage brands, and 21 brands under other category.

Below are the institutional investors of SSI: (courtesy of Financial Times).

institutional

As of February 6, 2016, 6 investment analysts’ forecast of SSI to outperform the market in the long term with high fair value estimate of 11.2, median estimate of 5.35 and low estimate of 3.0.

What is interesting on this battered stock aside from its good fundamentals is the technical side.  Although it is bearish in mid term trend but the short term trend has already become bullish as per ichimoku elements as of Feb 12, 2016.

Looking at the longer time-frame chart, it is also interesting as it nears the major resistance.  I believe that this stock, with the current price, is too much undervalued.

SSI

It is just a matter of time when to break this major resistance for long term investors. This is not a mining or gaming stock.

Are you willing to wait? 🙂

Disclaimer: This article is for information purposes only. There are risks involved with investing including loss of capital. The information provided in the website is only an opinion of the author and  does not constitute as legal advice, research or recommendation to buy or sell any securities

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