A cash burner Merrymart (MM) should capitalize on the market’s strong confidence in itself to raise more funds for expansion to achieve optimum operational efficiency

Nine-month result of MerryMart Consumer Corp. (MM) showed that the company is barely profitable.  The total revenue of 2.4 Billion Pesos during the nine-month period translated into a net income of only 0.014 Billion Pesos for a net income margin of 0.58%.

In the third quarter MM was not profitable.  It posted a net loss before tax of 0.2 Million Pesos out of the total revenue of 770 Million Pesos.

MM’s operation is a cash burner.  For the nine-month period, MM burned 277 Million Pesos of cash on operating activities. 

Grocery stores operate on a slim profit margin per item. Generally, profit margins are between 1 percent and 3 percent, depending on the item. It’s not unusual for a grocery store to make just a few cents per item. Grocery stores make money on volume. They’re counting on customers to buy many items per shopping trip, so the store’s profits will add up.

Despite being a cash burner, MM is trading at 5.15 around it’s all time high.  That would be 5x times its IPO price of 1 peso a share. MerryMart should take advantage of this extraordinary market confidence in itself to raise funds for expansion to achieve what it calls optimum operational efficiency and effective consumer brand pull. MM should do a stock rights offering now, otherwise the opportunity will be gone once the market gets tired of waiting for that optimum operational efficiency to come.

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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.