2,9260-store 7-Eleven PH (SEVN) no match to Covid-19 pandemic, pandemic wounded SEVN bleeds red during the 9-month period of 2020

As of September 30, 2020, Philippine Seven Corporation (SEVN) has 2,960 7-Eleven convenience stores.  SEVN’s store count is 8% higher than the same period in 2019. At the end of the third quarter, there are 2,249 7-Eleven stores in Luzon, 1,018 of which are in Metro Manila, 427 in Visayas and 284 in Mindanao. Franchisees operate 55% of the store base and 45% remain to be company owned.

SEVN boasted that it is the only operator with the critical mass to build out proper supply chains in areas logistically unreachable from the greater Metro Manila area. SEVN has fourteen (14) operating distribution centers (DC) nationwide. There are six DCs in Luzon, five in Visayas and three in Mindanao. Its digital efforts have led to a more data-driven approach, incorporating elasticity to assortment and pricing.

Despite being the largest by wide margin and the most technologically sophisticated convenience store operator in the country, SEVN was not immune to the pandemic.  The pandemic inflicted SEVN a total comprehensive net loss of 585 Million Pesos for the 9-month period ending September 30, 2020.  In the third quarter alone SEVN suffered a comprehensive net loss of 196 Million Pesos.  The net loss is  a reversal of the 211 Million Pesos comprehensive net income last year of the same period.

With a net loss SEVN struggled to generate cash from operations.  It only generated 397 Million Pesos of cash from operations during the month period of 2020.  During the first nine-months of last year, SEVN generated 5,082 Million Pesos of cash from operations.

With no significant cash generated from operations to avoid running out of cash, SEVN resorted to borrowing during the nine-month period. During the nine-month period SEVN borrowed 3,700 Million Pesos to pay bank loans and rents (leases)  and fund expansion.  The borrowing enabled SEVN to preserve its cash balance.  At the end of the 9M20 SEVN had a cash balance of 4,740 Million Pesos.

SEVN being the largest and the most technologically sophisticated convenience store in the country has well been regarded by the market. SEVN has a P/E ratio of 148.15 and a P/BV ratio of 11.10.  Institutional shareholders account for 17.44% of its shares.

There is risk that the market might flee from companies that have not been immune to the pandemic. SEVN has well been regarded by the market for its scale and sophistication but SEVN might not have met the market’s expectations as its results proved that it has not been immune to the pandemic.

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Disclaimer and Disclosure: This analysis is an independent viewpoint on publicly traded stocks in the Philippine market.  Accuretti Systems Inc. trades stocks in the Philippine market.

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