By Pierce Oel A. Montalvo, Researcher
SHARES of Robinsons Retail Holdings, Inc. (RRHI) rose last week after its board approved a voluntary delisting and a P48.30-per-share tender offer, with analysts saying the value offers a premium to recent trading levels but stays below intrinsic value.
Data from the Philippine Stock Exchange (PSE) showed RRHI because the 11th most actively traded stock throughout the week, with 24.34 million shares valued at P457.93 million changing hands.
Shares of the retailer closed at P46.01 on Wednesday, up 18.2% from P38.95 previously. This outperformed the benchmark PSE index (PSEi), which rose by 0.4%, while the services sector index gained 0.1%.
12 months so far, the stock has risen by 39.3%, outpacing the PSEi’s 0.9% decline and the services sector’s 14.4% increase.
Trading was suspended on Thursday and Friday as a consequence of the Maundy Thursday and Good Friday holidays.
On March 27, RRHI said its board had unanimously approved a voluntary delisting after receiving a notice of intent from JE Holdings, Inc., its largest shareholder with a 46.1% stake, to conduct a young offer for all outstanding shares not held by the delisting proponents.
The tender offer price of P48.30 per share represents a 32.23% premium over the one-year volume-weighted average price of P36.5285 as of March 26. The value is supported by a fairness opinion from FTI Consulting Philippines, Inc.
RRHI reported net income attributable to equity holders of P5.71 billion, down 44.5% from P10.28 billion in 2024. Revenues rose by 5.7% to P210.42 billion from P199.17 billion.
“We expect RRHI is pursuing a voluntary delisting as a consequence of management’s belief that its shares are undervalued,” said Adrian Geoffrey Go, an equity analyst at Sun Life Investment Management and Trust Corp., in an e-mail.
He added that “prior to the share price spike, RRHI was trading at a sub-10x price-to-earnings (P/E) ratio, which management likely viewed as a horny level relative to RRHI’s underlying valuation.”
Mr. Go said each the P48.30 tender offer price and the P50 buyback price “represent a big premium over its share price on the time,” but added that “each prices are still notably lower than its 2013 IPO price of P58 per share.”
He said current valuations may reflect “limited trading volume post index exclusion,” “investor perception on capital allocation decisions,” and “a broad de-rating seen across most Philippine industries.”
The voluntary delisting requires approval from shareholders representing a minimum of two-thirds of RRHI’s outstanding shares on the annual stockholders’ meeting scheduled on May 12.
Votes against the delisting must not exceed 10% of total outstanding shares.
For the delisting to proceed, JE Holdings and other proponents must collectively own a minimum of 95% of RRHI’s issued and outstanding capital stock after the tender offer, in step with the PSE’s amended voluntary delisting rules.
The transaction also requires approval from the Philippine Competition Commission.
“The gap could widen if the market loses confidence within the 95% threshold being met,” Mr. Go said.
He added that “we don’t think that the gap should narrow further, as those positioning for the tender offer would require an honest return for the danger that they’re taking.”
Mr. Go said that if the tender offer doesn’t push through, “the market begins to value RRHI closer to the tender offer price, which is an indicative level where management may feel appropriate valuations needs to be,” though he added “that is unlikely as the corporate will likely be weighed down by its current yield at sub-5%, lower than comparable peers.”
Minority shareholders who select to not tender their shares will retain ownership but may face constraints.
“Minority shareholders who select to not tender will still retain their ownership of RRHI, but will likely be subject to less liquidity and difficulty selling since there isn’t a more public market,” Mr. Go said.
He added that shareholders would also face “higher taxes in the shape of capital gains tax and documentary stamp tax, versus only a stock transaction tax for publicly listed firms plus manual filing per transaction,” in addition to “potential for less disclosure on company operations and results.”
Despite the premium, analysts said the tender offer may not fully reflect RRHI’s growth potential.
“We expect the corporate to grow its core earnings at a compound annual growth rate (CAGR) of 12% over the following five years through a mix of a high single digit CAGR for operating income and a gradual deleveraging from the debt taken on to fund its recent share acquisitions,” Mr. Go said.
He added that “the tender offer price of P48.30 per share implies a P/E ratio of around 9x, implying a P/E-to-growth ratio below 1, which we predict continues to be too low for the corporate’s underlying prospects.”
Mr. Go said the broader implications of the delisting trend could point to shifting market dynamics.
“More frequent delisting discussions could imply that some firms are unhappy with their market valuations and feel that the additional cost of being a publicly traded company isn’t well worth the valuation mismatch,” he said.
He added that “firms with the financial capability to accomplish that may opt to take their firms private (as with Metro Pacific Investments Corp. before) and search for opportunities to receive improved valuations elsewhere (i.e. private markets, or a business spinoff).”
Looking ahead, Mr. Go said a sustained valuation re-rating for RRHI would require catalysts.
“Deleveraging the balance sheet is one example, though higher oil prices and other upside risks to inflation might affect the corporate’s flexibility to pay down and/or refinance debt at lower rates,” he said.