Is MM current market price justified fundamentally?

MerryMart Consumer Corp. (MM), formerly Injap Supermart Inc., is a consumer-focused retail company principally engaged in the operation of retail stores in the supermarket and, beginning January 30, 2020, household essentials category. MM, through its subsidiary, MerryMart Grocery Centers Inc. (MMGC) intends to pioneer the franchise business model covering supermarkets and household essentials stores in the Philippines (collectively, MM and its subsidiary, MMGC, are known as the 'MM Group').

Currently, the MM Group owns and operates seven MM branches nationwide, with an aggregate selling space of 9,331 square meters. The MM Group aims to open six more MM branches by the second quarter of 2020, six additional branches by the third quarter of 2020, and have a total of 100 branches located all over the Philippines by the fourth quarter of 2021.

MM is a wholly-owned subsidiary of Injap Investments Inc., which also owns 35% of DoubleDragon Properties Corp.

As of July 2, 2020, MM was last traded at 3.29php per share. This company was recently listed last June 15, 2020, and released their first quarter report the other day. What valuation can we get from their March 2020 quarterly report?

Trailing P/E = 3.29 / 0.03 = 109.6 Indicating that for every 1php income last 12 months, investors are willing to pay or is paying 109.6php. It is said that an overvalued company would be one trading at a rate that’s 50 times earnings, or it could be an optimism whereby investors expect earnings growth in the coming quarters and, as a result, investors have been buying the stock in anticipation of its appreciation. MM nature of business is like of that PGOLD and RRHI which are companies that are already established, the P/E’s of these companies are below 20, yet MM P/E is above 100. Having said this, I say that the expectation is a bit much, thus it’s potentially overvalued.

Price to Book Value per share (P/B) = 3.29 / 0.07 = 47, meaning, the current market price per share is 47 times higher that the real worth of the company as based on their March 2020 financial report. A P/B of more than 3 is potentially overvalued.

Even though the net income for the first 3 months this year increased by 50.5% from the last year first 3 months, still, based on the P/E comparing it with established companies, the current price seems to be not justified, not to mentioned the P/B ratio.

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