7-Eleven shares may be bargains (Stock Watcher Shorts Series)

When it comes to convenience stores in the Philippines, 7-Eleven remains the most visible. And the operator behind 7-Eleven stores, Philippine Seven Corporation (PSC), reported that it now has 4,022 stores nationwide and is aiming for 4,100 by the end of this year.

On top of that, PSC reported that its net income for the first six months of the year increased by 14% to P1.76 billion compared to the same period in 2023.

For full-year 2023, PSC said that its net income went up by 69.3% to P3.48 billion compared to 2022.

PSC also announced in early July that it plans to spend P4.5 billion for the refurbishment of old 7-Eleven stores and the opening of new branches.

However, even with those positive developments, the price of the shares of PSC listed at the Philippine Stock Exchange (PSE) has not yet advanced or recovered to previous highs.

And this may mean that PSC shares can be considered a bargain or discount for stock market investors.

This, as the shares of PSC has been trading between P70 to P79 apiece since the beginning of October. Meanwhile, the highest close of PSC shares over the past 52 weeks was P137.50 in June this year, and lowest close was P64.55 in August.

Notably on November 4, the price of PSC shares increased by 8.22% to P79 apiece.

PROJECTED PRICE MOVEMENT

The good news is Maybank Investment Banking Group (IBG) in report released in early October has set a target price of P90 for PSC shares over a 12-month period.

Maybank IBG said that the convenience store (CVS) market in the Philippines is still not saturated, and that PSC’s branch expansion will also be aided by franchising.

Hence, PSC can attain having 5,000 stores nationwide by the end of 2026, with the markets in Mindanao and the Visayas fueling the expansion.

“We think the CVS market in the Philippines is still underpenetrated. SEVN estimates the current addressable market in the Philippines is 20,000-25,000 people per store, leaving enough room for expansion, compared to Thailand, which has 15,000 7-Eleven stores with coverage density of 5,000-8,000 people per store,” the investment bank said. SEVN is also PSC.

“Franchising speeds up expansion SEVN’s franchise model is an integral part of its nationwide presence, as it has enabled SEVN to expand aggressively in Visayas and Mindanao, securing first-mover advantage through well-established logistics infrastructure and head office support. Franchised stores account for 48% of SEVN’s store network, and will be the key driver to reach SEVN’s 5,000-store goal by mid-FY26E (fiscal year 2026 estimate),” Maybank IBG said.

UPSIDE AND DOWNSIDE FACTORS

When it comes to upside and downside factors, Maybank IBG identified the following upside (to quote):
 Higher-than-expected SSSG (same store sales growth) despite intensifying competition;
 Better-than-expected margin expansion from higher share of ready-to-eat food and beverages; and
 More aggressive expansion in underpenetrated regions might boost operating results.

On the other hand, the following downside factors were identified (to quote):
 Heightened competition among local and regional players; large and small formats; and
 Delays in store openings.

Concluding, PSC continues to solidify its position as the top convenience store operator in the country, and its shares listed at the PSE could be a good addition to the portfolio of stock market investors.

(PHOTO FROM 7-ELEVEN PH FACEBOOK PAGE)