OUTLIER: Grocery operator MerryMart gets merry debut and trading week

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By Jobo E. Hernandez, Researcher

MERRYMART Consumer Corp. ended up as the most actively traded stock in the Philippine Stock Exchange (PSE) last week following its market debut on Monday.

The stock’s debut saw a total of P3.45 billion worth of 1.28 billion shares exchanged hands on the trading floor from June 15 to 19, data from the PSE showed.

MerryMart shares closed at P2.95 apiece on Friday, up 195% from its initial public offering (IPO) price at P1 per share.

“MerryMart shares experienced three consecutive days of ending on its ceiling price as the general market felt bullish over the company, its industry, and its growth plans. It helps that they offer essential goods, as this is something that would help them cope up with the challenging times that the pandemic brings.” Timson Securities, Inc. Head of Online Trading and Trader Darren Blaine T. Pangan said in an e-mail

Mr. Pangan also noted a positive investor sentiment towards the company’s capability to deliver on its growth strategies and guidance reports.

Regina Capital Development Corp. Equity Analyst Anna Corenne M. Agravio shared this assessment: “[MerryMart’s] public debut is the country’s first IPO for the year, so I think there’s been a lot of pent-up activity especially on the side of retail investors,” she said in a separate e-mail.

“At some point, a correction occurred which caused a massive mid-week selldown, but this is not indicative of MerryMart’s fundamentals. More so, it’s just attributable to investors taking profits or cashing in on gains,” she added.

The grocery operator of businessman Edgar “Injap” J. Sia II offered 1,594,936,709 shares to the public at P1 each from May 27 to June 5. It tapped PNB Capital and Investment Corp. as lead underwriter, issue manager, and bookrunner for the offering.

The company is the first to do an IPO this year after the coronavirus disease 2019 (COVID-19) pandemic challenged economies and pulled the local stock market to historic lows in March.

MerryMart shares were listed on the small, medium and emerging board of the PSE.

Its P1.6-billion IPO was two times oversubscribed. The first three days of trading saw the stock closing at intraday highs. Its price went up to as high as P4.50 on Thursday before closing at P2.75. On Friday, it reached an intraday high of P3.10 before closing the day at P2.95.

Mr. Sia, who is also MerryMart’s chairman and chief executive officer, told BusinessWorld on May 23 the company was committed to its expansion plans despite ongoing pandemic woes.

MerryMart believes it will perform well amid the pandemic as its business is in the non-discretionary basic essential retail category, it said in a previous statement. It intends to focus on this segment, it added.

MerryMart aims to have 1,200 branches across the country by 2030, with 100 branches as early as the fourth quarter of 2021. It also has plans to put up warehouses and distribution centers in CentralHub warehouse complexes in DoubleDragon Properties Corp., Mr. Sia’s other listed firm.

MerryMart is under Injap Investments, Inc., which is the founder of Mang Inasal Philippines, Inc. and a key shareholder of DoubleDragon.

“The retail industry as a whole is one of the more resilient sectors amid the pandemic, so MerryMart is in a position to take advantage of this. But while sales growth would likely be positive this year, one of its downsides is that it is not yet a market leader and has a smaller store network than most. Nevertheless, this is still a good avenue for long-term growth,” Regina Capital’s Ms. Agravio said.

“If you’re looking at it from a fundamental standpoint, sales will likely remain healthy for MerryMart since demand for consumer goods has remained stable amid the pandemic. From a technical standpoint, price volatility may begin to simmer down within the next few weeks,” she added.

Ms. Agravio placed the stock’s support “anywhere between P2 to P2.25” and resistance at the stock’s recent high of P4.50.

For Timson Securities’ Mr. Pangan: “We may have to see if P4.00 will be breached, else if the stock breaks down and tries to fill the gap, then support may be pegged at P2.25. We’ll have to observe if volatility lasts throughout the week or if it dies down before Wednesday.”