Share analysis: Rey Holdings – retail

The Company

Rey Holdings is a publicly traded holding company, listed on the Panama Stock Exchange (Bolsa de Valores de Panamá, BVP) under the ticker symbol REYH. The company owns 100% of Empresas Rey, which in turn owns 100% of Immobiliaria Don Antonio, Agroindustrial Rey and Setrey. Although the company was officially founded in 2000, it can trace its origins as far back as 1911.

Together, these companies own and operate three different supermarket chains throughout the country, including Supermercados Rey, with 24 branches; Supermercados Romero, with 10 locations; and Supermercados Mr. Precio, which has 10 branches. In addition, the group owns and operates two large pharmacy chains – namely, Metro Plus, which has 23 locations in Panama, and Metro Express, which has four branches. In terms of its domestic footprint, the company primarily operates in the provinces of Panama City, Colón and Chiriquí.

The group’s supermarket chains market themselves as one-stop shops for Panamanian families. In addition to offering high quality products, some are open 24 hours a day, giving them an advantage over other chains. Rey Holdings plans to continue the expansion and improvement of each of its subsidiaries, looking to optimise the group’s supply chain and presence throughout Panama.

The company has also made investments in complementary commercial projects related to the processing and commercialisation of edible goods, home products and pharmaceutical items.

In addition, through its wholly owned subsidiary Empresas Rey, the company is active in sectors including real estate, livestock and agriculture, as well as the development of forestry products and teak.

Growth Strategy

In 2011 the group – through Immobiliaria Don Antonio – acquired the operations of two large pharmacy chains, Farmacias Metro and Econo Farmacias, helping to expand its local presence. In 2014 the group began implementing new strategies for these pharmacies, incorporating supermarket-like products in order to give the chains key advantages over their competitors.

With a total of 44 branches across the country, the group’s supermarket chains handle more than 54,000 different products, including foods, liquors, pharmaceutical products, baked goods, and home and school items. The supermarket industry in the country remains highly competitive, and there are eight important chains with a national presence. Grupo Rey’s top competitors are Súper 99, Riba Smith, El Machetazo, Xtra and El Fuerte.

Agroindustrial Rey, the group’s agribusiness subsidiary, is in charge of the research and development of new production techniques with the help of specialised consultants in the market. The company’s research focuses on new methods, technologies and genetics, aimed at optimising efficiency in the industry and creating high-quality products. Agroindustrial Rey has been investing about $1m per year since 2010 on these efforts.

Group Performance

At the end of 2014 the group’s consolidated assets stood at $402.7m, up 13.7% over the previous year. Property, plant and equipment made up the majority of the group’s consolidated assets, at 54.1%. This balance sheet growth was primarily driven by increases in other current assets, which rose from $1.8m in 2013 to $20.2m in 2014. The group’s total debt came to $90.3m as of the end of 2014, up 25.3% over 2013.

Rey Holdings reported total sales of $687.5m for the year, representing a 1.3% increase over the same period in 2013. Meanwhile, net income reached $23.1m, down 4.1% compared to 2013.

In the stock market, the company closed the year with a share price of $16, for a total market capitalisation of $508.9m and a price-to-earnings ratio of 24.9x for the last 12 months. Its shares were trading at a 12-month low, with the BVP index outperforming the stock by about 10.2% over the year.