Emperador Secondary Listing on SGX
How would it trade?
Emperador, whose primary listing in on the Philippine Stock Exchange will conduct a secondary listing on the SGX Mainboard today.
Why would the Emperador want to do a secondary listing on the SGX?
I think that is more or less answered when SGX approve their listing on April 2022 and the share price jumped from ₱14 to almost ₱20.
Is this valuation sustainable?
Emperador is the core company of the Alliance Global Group owned by businessman Andrew Tan. The company’s name and core brand Emperador sold 23.6m cases in 2020 making it the top selling brandy in the world.
In 2014, Emperador acquired Whyte & Makay (W&M) a top tier Scotch whiskey company. While the Emperador brand is primarily sold in the Philippines, W&M products are distributed mainly in Europe and the US.
In 2015, Emperador acquired four Spanish brand from Suntory and in 2016 acquired Domecq brandy.
Currently, Emperador offers from cheap liquor (Emperador) to top end brands like Dalmore.
With a market capitalisation of around ₱274,100m and earnings of ₱9,971m, Emperador is trading at 27.4x, debt to equity ratio of 33% with a ROE of 13.6%.
Since liquor sales is a global game and Emperador in their slides had indicated that they had plans to internationalise their business, a few international brands come into mind.
Diageo (Johnnie Walker, Smirnoff and Guinness brands) trades at around 23x normalised earnings thou they carry a heavier debt to equity ratio of 152% with a ROE at 42.1%.
Davide Campari-Milano N.V. (Aperol, Campari, SKYY and Wild Turkey) trades at around 33x normalised earnings with a lighted debt to equity ratio of 69.2% with a ROE at 12.9%.
Pernod Ricard SA (Absolut, Chivas, Martell and The Glenlivet) trades at around 21x normalised earnings with a debt to equity ratio of 62.1% with a ROE at 11.5%.
If we are to use the best international brands as a comparison, Emperador do seem to be fairly valued on a PE basis.
On the other hand, Emperador’s balance sheet seems to be under-levered in comparison to their international peers.
With the listing on the SGX and the additional recognition from international banks, would Emperador should be able to use their balance sheet strength to their advantage by growing earnings through more aggressive acquisitions?
ROE should expand if both earnings and debt rises. That should help to keep the PE comparable to their global peers.