June 16, 2015

SSI ups expansion targets to sustain growth

In a media briefing yesterday, the SSI Group Inc (SSI) president said the company will be maintaining its aggressive expansion as a way to sustain growth. For this year, SSI is guiding for a 22% topline and earnings growth and hopes to keep this pace through expansion. It has raised its capex this year to over P2b from P1.5b as it increased the retail expansion by 17% to 21k sqm from the initial estimate of 18k sqm. Next year, it plans to spend P1.7b to add another 16k-17k sqm of retail space.

Our take: SSI has been reaping the benefits from previous expansion (+64k sqm in the last three years with about half came on stream last year) that had the company expanding its stores across market segments and increasing its brand offering. Net income grew 22% in 1Q15 to P267m which came largely in line with consensus forecast if we take into account seasonal trends. Its share price has dropped 18% from the recent peak and trades at 25.1x 2015F earnings 19.9x 2016F earnings. We would take advantage of any further weakness to pick up SSI’s shares.– WealthSec