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Background: PSC is the modern face of the old provisions store. Started in 1974 as a cooperative central purchaser, it is now involved in a range of consumer businesses, such as fast moving consumer goods (FMCG), footwear and apparel and franchised grocery retail chain stores. It also has a strategic investment arm that takes equity stakes in promising non-core but possibly strategic businesses.
Recent developments: One of PSC’s substantial shareholders, Super Group, recently sold its entire 8.9% stake at a substantial premium to a PSC insider. Prior to this, PSC had also made a string of investments in non-core businesses such as China property development and the running of a sports lottery in Cambodia.
Key ratios…
Price-to-earnings: 9.7x
Price-to-NTA: 0.5x
Dividend per share / yield: $0.01 / 4.0%
Source: Bloomberg, based on historical data
Share price S$0.25
Issued shares (m) 556.0
Market cap (S$m) 139.0
Free float (%) 54.7
Recent fundraising activities Aug 2007: 1-for-2 rights issue at $0.33 per rights share, following 5-into-1 stock consolidation
Financial YE 31 December
Major shareholders Violet Profit / Ku Yun-Sen (24.1%), Goi Seng Hui (12.2%), Tang Cheuk Chee (8.9%)
YTD change -9.1%
52-wk price range S$0.24-0.285
Our view:
Reaching deep into local hearts and pockets. PSC has been supplying the household needs of Singaporeans for generations with a range of groceries, household supplies, beverages, and health and beauty products. Its proprietary FMCG brands include Royal Umbrella and Golden Peony rice, Sobe soya milk and Fortune tofu. It also distributes third-party products from Nestle, Kao, 3M, Lion and Reckitt Benckiser, among others. In addition, it runs a large chain of minimarts in Singapore under the iEcon name, using a franchise model.
Beyond groceries. Since 2003, PSC has acquired strategic stakes in two publicly-listed companies – Tat Seng Packaging (64%) and Intraco (29.9%). Tat Seng makes corrugated paper packaging used in its FMCG business, while Intraco has a complementary seafood trading business. Less complementary however is a hospital consultancy, property development in China and recently, a 25% stake in a company that runs a sports lottery in Cambodia.
The Super Sale. Super’s sale of its PSC stake at a slight loss of $0.8m is not surprising as it wants to focus on its core coffee business. More interesting is the premium of 83.6% paid by the buyer, who is the spouse of PSC’s executive chairman, Dr Allan Yap. Although Dr Yap’s deemed holdings in PSC (last at 17.4%) did not exceed the MGO trigger of 30%, any offer made by him in the next 12 months would have to be made at the same price ($0.486).
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