WLCON (WILCON DEPOT, INC.) growing, debt-free, and cash flow positive despite the pandemic

WILCON DEPOT, INC. (WLCON) is a hardware store operator doing business under the name and style of WILCON DEPOT and WILCON HOME ESSENTIALS. It has 61 stores across the country. During the year WLCON opened four new depots all located in Luzon.

WLCON recorded net sales of ₱15.8 Billion for the nine-month period ended September 30, 2020, a decrease of 12.5% or ₱2.2 Billion from the ₱18 Billion for the same period in 2019.  Comparable sales performance dropped to negative 18.3% because of the temporary closure of stores in Luzon and some stores in Visayas and Mindanao from March 17 to May 15, 2020 during the quarantine period.

Gross profit margin of WLCON improved to 34.4% from last year’s 32.8%.  The gross profit margin improvement was brought about by the increasing margin and expanding contribution of

in-house and exclusive products to total net sales. Sales of exclusive and in-house products accounted for 51.4% of total net sales for the period versus 49.2% in the same period in 2019.  In-house and exclusive products are more profitable as they cost less for WLCON.

Gross profit margin improvement was off-set by higher operating expenses from depreciation and amortization as a result of the continuous addition of company-owned stores and buildings.

Although net income was lower compared to last year’s, cash generated from operations increased to ₱2.4 Billion from last year’s 2 Billion.  This is so because net income was driven down by non-cash depreciation and amortization expenses.

With no debts, WLCON is able to build more stores using cash generated from operations and increase its cash pile. WLCON ended the 9M20 with cash of ₱1.6 Billion and short-term investments of ₱2 Billion.

WLCON is valued at 39.55 P/E.  Companies with pandemic ready balance sheets and operations are valued well.  Foreign institutional investors/funds held 7.21% of WLCON as of September 30, 2020 according to FactSet Research Systems Inc.

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Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent viewpoint.  Accuretti Systems Inc. in day to day trading may have owned, or is considering buying or disposing, the shares of the companies mentioned in this commentary.