RRHI shares rise on delisting plan

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 price offers a premium to recent trading levels but remains below intrinsic value.

Data from the Philippine Stock Exchange (PSE) showed RRHI as the 11^th most actively traded stock during 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%.

Year to date, 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 due to 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 tender 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 price 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 think RRHI is pursuing a voluntary delisting due to 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 an attractive level relative to RRHI’s underlying valuation.”

Mr. Go said both the P48.30 tender offer price and the P50 buyback price “represent a significant premium over its share price at the time,” but added that “both 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 at least two-thirds of RRHI’s outstanding shares at 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 at least 95% of RRHI’s issued and outstanding capital stock after the tender offer, in line 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 in the 95% threshold being met,” Mr. Go said.

He added that “we do not think that the gap should narrow further, as those positioning for the tender offer would require a decent return for the risk that they are taking.”

Mr. Go said that if the tender offer does not 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 should be,” though he added “this is unlikely as the company will be weighed down by its current yield at sub-5%, lower than comparable peers.”

Minority shareholders who choose not to tender their shares will retain ownership but may face constraints.

“Minority shareholders who choose not to tender will still retain their ownership of RRHI, but will be subject to less liquidity and difficulty selling since there is no more public market,” Mr. Go said.

He added that shareholders would also face “higher taxes in the form of capital gains tax and documentary stamp tax, versus just a stock transaction tax for publicly listed companies plus manual filing per transaction,” as well as “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 company to grow its core earnings at a compound annual growth rate (CAGR) of 12% over the next five years through a combination 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 think is still too low for the company’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 companies are unhappy with their market valuations and feel that the extra cost of being a publicly traded company is not worth the valuation mismatch,” he said.

He added that “companies with the financial capability to do so may opt to take their companies private (as with Metro Pacific Investments Corp. before) and look 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 company’s flexibility to pay down and/or refinance debt at lower rates,” he said.