MerryMart Consumer (MM) is currently trading at 4.27 level. That maybe down 46.56% year-to-date but at that price MM is still very much valued at a substantial premium. At that price MM’s price to book value is at 17.44X and P/E ratio is at 436X.
In 2020, MM made an aggressive expansion. Its aggressive expansion caused it to burn cash on operating activities of 468 Million Pesos and spend cash on capital expenditures of 837 Million Pesos. Proceeds from its IPO and borrowings provided the cash on its balance sheet at the end of 2020.
The cash burn continued into the first quarter of 2021. Net cash used on operating activities for the first quarter of 2021 was 246 Million and net cash used on capital expenditures was 128 Million. MM also continued to borrow money to fund the cash burn.
MM is a start-up trying to disrupt or reinvent the supermaket business to modern retail. MM plans to develop the MerryMart brand through company-owned stores, as well as opening it for franchising to the public. MM will serve as a platform for the existing local and traditional supermarkets to convert and be part of a modern-branded retail chain network while retaining ownership of the store as a franchisee of MM. Being part of the MerryMart network will allow current traditional retailers to remain relevant for the coming decades and also enable them to bridge the ongoing shift from traditional retail to modern retail.
MM at elevated valuation has the support of its shareholders. MM should take advantage of this tremendous shareholder support by doing a follow-on offering to raise fresh capital for its aggressive expansion.
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