UPSON: THE INITIAL PUBLIC OFFERING
CASE STUDY SOLUTION
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SYNOPSIS
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The case concerns the initial public offering (IPO) of Upson International Corporation (Upson), which was
scheduled to be listed on the Philippine Stock Exchange Inc. (PSE) on April 3, 2023. In 2022, Upson was
the largest retailer of IT products in the Philippines. The company owned 200 stores around the country,
mainly located inside shopping malls, consumer electronic shops, and other hubs with high foot traffic. The
company sold well-known global IT brands through its retail stores and e-commerce platforms. From 2023
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to 2027, Upson planned to use the net proceeds from its IPO proceeds to expand its network and market
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share. The company aimed to build 250 new stores, or 25,000 square metres of additional retail space. The
IPO was set to issue 625,001,000 common shares with an offer price of ₱2.402 per share. The objective of
the case is to run a valuation of Upson using two methods: discounted cash flow (DCF) and forward-looking
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comparable multiple analysis. This case asks students to recommend whether or not a retail investor should
buy Upson stock. To make their recommendations, students should evaluate the growth prospects,
challenges, and risks associated with both Upson and the Philippine consumer electronics retail industry.
So
OBJECTIVES
• Assess the attractiveness of a firm as an investment opportunity based on industry and company
characteristics.
• Define and describe the terms of an IPO.
• Perform a DCF valuation with a weighted average cost of capital (WACC) based on a capital asset
pricing model (CAPM).
• Estimate beta based on stock prices and index values.
• Create a forward-looking comparable multiples analysis.
• Issue a recommendation on whether or not the initial public offering of equity should be bought
The Case Solution Starts From page 5
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ASSIGNMENT QUESTIONS
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1. Assess the attractiveness of Upson as an investment opportunity based on the characteristics both of
the company and of the Philippine consumer electronics retail industry.
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2. Describe the terms of Upson’s IPO.
3. Run a post-IPO DCF valuation of Upson using a CAPM-based WACC. Compare the derived intrinsic
price to the IPO price.
4. Create a post-IPO forward Comparable Multiple analysis for Upson shares using NTM TEV/EBITDA
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NTM, EV/Revenue NTM, and P/E NTM. Compare the derived intrinsic price to IPO price.
5. Should Abrina invest in Upson’s IPO? Explain your answer.
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So
The Case Solution Starts From page 5
,ANALYSIS
1. Assess the attractiveness of Upson as an investment opportunity based on the characteristics
both of the company and of the Philippine consumer electronics retail industry.
Upson was a market leader in the Philippine consumer electronics retail industry. In 2022, the Philippine
economy was strengthening, and national gross domestic product (GDP) grew by 7.6 per cent amid high
inflation of 5.8 per cent. In 2023, the Philippines’ real GDP was expected to rise by 5.3 per cent. The
Philippine stock market index was slowly recovering, but had not yet returned to the levels it reached before
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the COVID-19 pandemic. Despite the pandemic-driven economic slowdown, the consumer electronics
market grew by 5.8 per cent between 2017 and 2022 , supported by the expansion of work-from-home and
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online learning arrangements as well as increased interest from the Philippine government in smart cities
and digital transformation.
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In the five years following its IPO, Upson planned to more than double its number of brick-and-mortar
stores from 200 to 459. Although there had been significant growth in online retailing and e-commerce,
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studies showed that 33 per cent of Philippine consumers still preferred to see and touch products before
buying. Further consumer insights show that 72 per cent of Filipino consumers showed brand awareness
when it came to purchasing electronic products.3
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Upson was a fast-growing IT product retailer. Its competitive advantages included its store brands, wide
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So
The Case Solution Starts From page 5
, EXHIBIT -3: FREE CASH FLOWS OR CASH FLOWS FROM ASSETS (₱*)
2022 2023 2024 2025 2026 2027
Sales 11,066,392 13,499,183 15,956,799 18,439,621 20,948,039
(10,431,546 (12,330,678 (14,249,289 (16,187,678
Cost of sales (8,551,597)
) ) ) )
Gross income 2,514,795 3,067,637 3,626,121 4,190,332 4,760,361
Operating expenses (1,455,458) (1,775,420) (2,098,647) (2,425,190) (2,755,098)
EBITDA 1,059,336 1,292,217 1,527,473 1,765,143 2,005,262
Depreciation expense
(313,065) (362,165) (411,264) (417,862) (430,943)
EBIT
746,271 930,052 1,116,209 1,347,281 1,574,320
Income tax
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pl
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tio
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The Case Solution Starts From page 5
CASE STUDY SOLUTION
e
pl
m
SYNOPSIS
Sa
The case concerns the initial public offering (IPO) of Upson International Corporation (Upson), which was
scheduled to be listed on the Philippine Stock Exchange Inc. (PSE) on April 3, 2023. In 2022, Upson was
the largest retailer of IT products in the Philippines. The company owned 200 stores around the country,
mainly located inside shopping malls, consumer electronic shops, and other hubs with high foot traffic. The
company sold well-known global IT brands through its retail stores and e-commerce platforms. From 2023
n
to 2027, Upson planned to use the net proceeds from its IPO proceeds to expand its network and market
tio
share. The company aimed to build 250 new stores, or 25,000 square metres of additional retail space. The
IPO was set to issue 625,001,000 common shares with an offer price of ₱2.402 per share. The objective of
the case is to run a valuation of Upson using two methods: discounted cash flow (DCF) and forward-looking
lu
comparable multiple analysis. This case asks students to recommend whether or not a retail investor should
buy Upson stock. To make their recommendations, students should evaluate the growth prospects,
challenges, and risks associated with both Upson and the Philippine consumer electronics retail industry.
So
OBJECTIVES
• Assess the attractiveness of a firm as an investment opportunity based on industry and company
characteristics.
• Define and describe the terms of an IPO.
• Perform a DCF valuation with a weighted average cost of capital (WACC) based on a capital asset
pricing model (CAPM).
• Estimate beta based on stock prices and index values.
• Create a forward-looking comparable multiples analysis.
• Issue a recommendation on whether or not the initial public offering of equity should be bought
The Case Solution Starts From page 5
, e
pl
ASSIGNMENT QUESTIONS
m
1. Assess the attractiveness of Upson as an investment opportunity based on the characteristics both of
the company and of the Philippine consumer electronics retail industry.
Sa
2. Describe the terms of Upson’s IPO.
3. Run a post-IPO DCF valuation of Upson using a CAPM-based WACC. Compare the derived intrinsic
price to the IPO price.
4. Create a post-IPO forward Comparable Multiple analysis for Upson shares using NTM TEV/EBITDA
n
NTM, EV/Revenue NTM, and P/E NTM. Compare the derived intrinsic price to IPO price.
5. Should Abrina invest in Upson’s IPO? Explain your answer.
tio
lu
So
The Case Solution Starts From page 5
,ANALYSIS
1. Assess the attractiveness of Upson as an investment opportunity based on the characteristics
both of the company and of the Philippine consumer electronics retail industry.
Upson was a market leader in the Philippine consumer electronics retail industry. In 2022, the Philippine
economy was strengthening, and national gross domestic product (GDP) grew by 7.6 per cent amid high
inflation of 5.8 per cent. In 2023, the Philippines’ real GDP was expected to rise by 5.3 per cent. The
Philippine stock market index was slowly recovering, but had not yet returned to the levels it reached before
e
the COVID-19 pandemic. Despite the pandemic-driven economic slowdown, the consumer electronics
market grew by 5.8 per cent between 2017 and 2022 , supported by the expansion of work-from-home and
pl
online learning arrangements as well as increased interest from the Philippine government in smart cities
and digital transformation.
m
In the five years following its IPO, Upson planned to more than double its number of brick-and-mortar
stores from 200 to 459. Although there had been significant growth in online retailing and e-commerce,
Sa
studies showed that 33 per cent of Philippine consumers still preferred to see and touch products before
buying. Further consumer insights show that 72 per cent of Filipino consumers showed brand awareness
when it came to purchasing electronic products.3
n
Upson was a fast-growing IT product retailer. Its competitive advantages included its store brands, wide
tio
lu
So
The Case Solution Starts From page 5
, EXHIBIT -3: FREE CASH FLOWS OR CASH FLOWS FROM ASSETS (₱*)
2022 2023 2024 2025 2026 2027
Sales 11,066,392 13,499,183 15,956,799 18,439,621 20,948,039
(10,431,546 (12,330,678 (14,249,289 (16,187,678
Cost of sales (8,551,597)
) ) ) )
Gross income 2,514,795 3,067,637 3,626,121 4,190,332 4,760,361
Operating expenses (1,455,458) (1,775,420) (2,098,647) (2,425,190) (2,755,098)
EBITDA 1,059,336 1,292,217 1,527,473 1,765,143 2,005,262
Depreciation expense
(313,065) (362,165) (411,264) (417,862) (430,943)
EBIT
746,271 930,052 1,116,209 1,347,281 1,574,320
Income tax
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pl
m
Sa
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tio
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So
The Case Solution Starts From page 5
