The Web Master would like to invite you all to my newly redesigned site at http://philippinejobs.ph
Investing in the Philippine Stock Market
November 28, 2002
Kevyn in My Heart
Wow. Watching Kevyn Lettau in action again sure brought back some memories. It wasn't well publicized, but I'm glad I chanced upon the ad. ;-) I was saddened though that the audience wasn't as appreciative as they could have been. Keep coming back Kevyn. I love the yummy outfit by the way.
But that's that. Now market watchers, have you all positioned ahead for the December window dressing? I haven't. I was thinking of picking up my low debt favorites: JFC, SMPH and LTDI. A single-digit PE BPI also looks good. One of these days, I'll get around to it. I just keep forgetting to post, that's all. Well good night.
November 21, 2002
Ah yes, it's been a while since I've even checked my own site. Well a lot has happened to the market since then. There have been major upheavals from SMC to PLDT and now of course, Meralco. Just within this year, the Phisix became a darkhorse for best performing market, before sliding back into oblivion (which we should be used to by now). Over the months, I've also acquired numerous views, one of which is to adopt a more global approach in investing.
I suppose global shouldn't just be understood in the geographic sense, but also in the type of investment sense. Notice how in the US business sites, there are always sections pertaining to personal finance. How come I never notice any of those in the local sites. Perhaps we're fixated in savings and TDs of banks. That's where the majority of our investments lie. And then there are the select stock market investors as well (all 1% of the population).
So I enjoin you all of you to walk with me through my journey towards further investment enlightenment (with a little help from Mr. Buffett of course!) One of these days, I may just start my own globally-focused investment club. ;-)
December 25, 2001
A Christmas View
Admittedly, over a month ago I didn't think much of a year-end rally. I reasoned out that the market giants SSS and GSIS promised to stay away from the market already. They'll be more prudent with our money this time, having figured in headlines relating to their bad investment decisions and their obscene salaries.
If these two institutions dipped their hands into the market as of late, I haven't really heard. However, I had failed to take into consideration that there are other fund managers out there who would be window dressing their portfolios. As far as our market goes, that's the only reason you need to chalk up a hundred point rise in one month.
And that's exactly what happened. Of course it helps that people are putting the US attacks behind them. Thus, most stock indices have already bounced back from their September lows. Actually in that respect, the Phisix is underperforming since it's still about a hundred points below the immediate pre-attack level.
Technically, it would have been attainable. But in the end, profit taking proved to be the more popular option as against pushing the market up. With the Christmas frenzy just around the corner, cash indeed was king. Backing up a bit, by December I was already convinced of that stark chage in investor sentiment. For sure, the market would be pushed up. It was just a matter of guessing up to what level.
Now just a week away from the new year, it's most probable that we would see sideways movement in the market this week with all the investors still in the province or abroad for the holidays. The logical next question of course would be the expectations for the coming year. Well, the closet doomsayer that I am, I believed that the recent rally would be terribly short term. While January may prove to be a rally month just to fulfill the charts, I'm still of the belief that sustained rallies should be anchored on better corporate bottom lines and hinged on economic recovery. The year's woes, from financial restructuring to bad debts to falling exports and of course rampant kidnapping, will not go away in a whim. So, while it is a rule of thumb that the market leads the economy by about six months, being the conservative fool that I am, I'd rather see the economy leading the market.
And these are my thoughts this Christmas morning. Do pray and attend mass later. God bless!
November 5, 2001
It's been more than a month since the attacks in the US took place. From that time up to present, the Phisix has dropped about 300 points. Is it already a time to buy?
That doesn't seem to be the case. The US just reported that its economy contracted in the third quarter, following the lead of its industrial sector which is already in recession. How will this affect the Philippine economy and the earnings of domestic companies?
For sure, electronics exports will continue to suffer. With exports contracting by 14% in the first nine months of the year, the country's trade balance is placed in a precocious situation. This would depress the GIR level, which from P15bn has already dwindled to just +P13bn.
With the country's obligations falling due and the peso in a currently weak state, it would be prudent for the government to have a higher level of GIR. This is especially true with concerns that Argentina may default on its external debt. About P100bn of its debts will fall due this month.
Now the yields for Philippine bonds have been rising, partly because there have been parallels cited between Argentina and the Philippines. Should investors perceive that Philippine sovereign risk be too high for their taste, we could see a shift into dollar-denominated instruments. Dollar outflows would further weigh against the peso. Should such a case happen, we can expect the BSP to try and intervene again. But with lower GIRs, speculators may be emboldened.
Whether these fears and more real or more imagined, expect it to affect the stock market negatively.
On the aftermath of the Sept. 11 attacks, the government has virtually conceded that it will overshoot its P145bn budget deficit target for 2001. That's why the wily banks are trying to push up the T-bill rates. The government has been rejecting the bids though, citing the lower-than-expected inflation. Bad corporate performances, as indicated by lower earnings, more business closures and layoffs, will surely result in lower tax collections.
Speaking of poor corporate results, even the biggest listed issues have been reporting debt repayment problems. With the international capital markets much tighter now because of the attacks in the US, companies like PLDT, BPC and recently MPC will have to be really creative to survive near term cash flow problems. This will also be a problem for banks. Already faced with dwindling loan demand, banks face a real threat of defaults from even big borrowers. As is, NPLs are hovering above 18%. As is, banks' capital levels are already artificially high due to their reluctance to price down their non-performing assets, including real properties. When the moment of truth does come however, it may be a good time to buy a house.
So basically, I am a doomsayer at this point even as the Index lies below 1000.
Nonetheless, if you just have to invest, I think the potential survivors here would be SMC, SMPH, SMDC, JFC and perhaps even SPI. LTDI would also be a defensive issue once it sells its non-liquor businesses. In a time of crisis, cash is king after all.
September 28, 2001
More to Digest
Events have really stepped up in the country as well as abroad.
In recent months, after the May 1 attack on Malacanang by Estrada loyalists, the stock exchange experienced steadily decreasing volumes. Among the reasons then was the uncertainty of newly installed President Arroyo’s performance in the coming months. Thus from the once-in-a-lifetime rally that saw the Phisix rise by an intraday high of 500 points, the same Phisix has continuously descended to what is now a fresh 8-year low.
By slipping another 14.96 points today, the main index once again threatens to test the latest support blocking its descent. We see 1075 as the next formidable support level and we see it being tested perhaps early next week.
So is it time to start bargain hunting? We checked out the more popular index issues for possible signals. We found a great number of them already in oversold territory. These would include: ABS, BPC, BPI, FPH, ICT, ION, JFC, MBT, MER and MERB. Among those issues, we only see MERB as primed for an immediate technical recovery. The others will probably share in the index’ depression until next week.
Now, if in the previous months, analysts generally blamed “lack of incentives to buy” as the cause of the index’ demise, this time around there seems to be a conspiracy of factors involved. The former reason of course was propagated after the technology meltdown in the US. At that time, opinions clashed as to whether the US can weather the dotcom crash with an aggressive monetary loosening strategy. Fed rate policy after all, was an erstwhile potent weapon by the US government.
However, for the year, the Fed had already cut rates by an unprecedented eight times, with the last taking place just before the New York Stock Exchange reopened after the terrorist attacks on the US. There are of course arguments that effects of rate cuts will lag by several months from implementation. So where does the US stand at this point? For sure, the tech meltdown has not reached bottom. Multi-billion dollar companies like Compaq and Dell have in fact been forced into a merger following the global slowdown in demand for PCs. In recent weeks, major technology companies have been issuing advanced profit warnings for the third quarter. And just yesterday, the US reported a nine-year low in unemployment. This was of course following a previous announcement that consumer confidence recorded its largest one-month drop since October 1990.
It’s a lot to digest already. For one it would definitely mean a continued drop in our electronics-heavy bag of exports (which incidentally have been declining for six consecutive months.) The slowdown in the US would also threaten our “export” of IT manpower, erstwhile touted as one of the bright points of the country.
Now this looming “infinite justice” war by the US can only serve to aggravate that situation. The borderless war, which is widely seen as a diplomatic landmine requiring the US to sleep with former enemies, most notably Iran, may even threaten the welfare of OFWs situated in the Middle East. That alone may threaten the economy in at least two ways: through unemployment and a cut in dollar remittances. Unemployment of course is already at a high 10.1% for July, while the country’s Gross International Reserves (GIR) have already slipped to $14.207bn as of end August following the BSP’s defense of the peso a month before.
Another headache in the making is the passage of the anti-money laundering law. The “watered down” bill to be passed by the bicameral committee of both houses of Congress may be disapproved by Paris-based Financial Action Task Force (FATF) as effective legislation against money laundering. Salient points against the bill would include the requirement of a court order before government authorities can inspect bank accounts as well as the non-inclusion of such crimes as plunder and tax evasion in the law. Of course it doesn’t inspire confidence that US tax evader and fugitive Rep. Mark Jimenez and plunderer-heir Rep. Bongbong Marcos are part of the bicameral committee.
Lastly, we can also view corporate health as a factor in the market’s decline. We all observed the sell-off that PLDT faced when reports came out that it may breach its 5.5:1 debt/equity ratio covenant with creditors. This time around, it’s Benpres facing the heat. The issue has had an unabated decline since August 17, falling by an aggregate of 46.1%. We noted that the issue’s trades have swelled in recent days, even as it closed another 2% lower today to P0.98. Notably, the company has P1bn worth of LTCPs supposedly maturing this month. So far the company has not issued any statement regarding the payment or refinancing of that debt. In light of this issue, both subsidiaries Meralco and ABS have likewise experienced heavy sell-offs. In light of these developments, it would be prudent to check not just the demand outlook of listed issues, but financial health, specifically liquidity as well.
September 12, 2001
When we noted that the local bourse will track the developments in the US, the day's terrorist attacks are not quite what we had in mind. Nonetheless, Philippine investors fell prey to "worry selling" (as against full blown panic selling) causing the PHISIX dropping 52.7 points to its three-year low. Nearly every issue traded posted losses, with only nine managing to trade up.
Turnover swelled, but not exactly to the billions that we feared. It reached P624mn, as against the below P400mn average that we have been experiencing. Perhaps it helped that portfolio investors had been selling off their Philippine equities for months. Otherwise, today's dip could have been more dramatic.
Elsewhere in the world, bourses that opened likewise experienced a selling frenzy. Investors' worries range from worldwide recession to a new world war. After all, the US is expected to retaliate, with US President Bush saying that they will make no distinction between terrorists and those who harbor the same.
In any case, for investors hunting for bargains in the market, take note of the following major blue chips that posted significant declines for the day: SLC (-12% to P990), SMPH (-9.09% to P6), TEL (-8.72% to P497.5), FDC (-6.98% to P0.8), DGTL (-6.25% to P0.45), MPC (-6.06% to P0.31), PCOR (-5.81% to P1.62), MERB (-5.49% to P43) and BPC (-5.41% to P43).
SLC, which at the height of the speculation against the peso months ago became the safe haven for investors' funds, today took on a new role as the stock to avoid. The same of course would hold true for MFC (-12.59% to P1250). Both insurance firms have assets primarily in the US and Canada. With thousands of people feared dead from the attacks, expect claims to pile up against insurance firms. Consequently, expect profits and share prices to tumble.
At this point, it may be too early to speculate on what will transpire in the coming months. For sure however, bourses worldwide must contend with uncertainties, not just in economic terms, but in peace and order issues as well. As is, the US and the rest of the world already speculate that Middle East terrorist forces are behind the attack. Should there be a standoff, we may see world crude oil prices spike back to or even exceed the Gulf War levels.
Reviewing today's performance, we believe the 50-point drop is a knee jerk reaction; an act of shock. In assessing potential repercussions in the world climate, we surmise that 50 points is probably not enough.
September 11, 2001
It's been a while hasn't it? And I've been saying that with greater frequency. Well my apologies to you site readers. I have been preoccupied with a lot of things. First of all, I'd like to congratulate my really good friend Anj, who got married last September 8. Too bad for single guys. She's one of the most engaging conversationalists I've ever come across. But back to the market now.
And so the Phisix is once again below the 1,300 level. A couple of weeks ago (or was it over a month already), I took a chance at three major issues. I bought TEL, MERB and AC. It was the gambler in me. After all, it has been a while since I put my money where my mouth is. The first two traded at 8-year lows, while AC was technically battered. Among the three, MERB has performed mightily, rising from P37.50 to P48 yesterday. Yummy profits for those who opted to wait.
TEL on the other hand came tumbling down. Just a while ago, I read a couple of articles detailing the gore of the telecommunications industry in the US. Gosh, these companies are HEAVILY indebted. The conservative analyst in me would accept a 1:1 debt / equity ratio. But these telcos, according to the articles had DE ratios of over 10. Eek! And thus, with the dotcom meltdown, the telcos lost the market's favor. In a way, that happened to PLDT too. Plagued by the very same heavy capital expenditures and resulting debts, the company was on the verge of breaching a debt covenant with its creditors. And boy did the foreign brokers sell when that report came out. And so came TEL, tumbling down to P475. Do you even remember when PLDT last traded at those levels? Not in my stock trading lifetime. Well, the issue almost singlehandedly brought the rest of the index down with it.
Am I optimistic on the stock? Well, I really just bought it because it was relatively dirt cheap. But I was never a PLDT fan to begin with. Assuming the company manages to stay afloat by refinancing all its debts, can it actually pare down its obligations in the coming years? I really don't think so. By the time the company would have enough cash flows to cut down its debt, it would probably be time to shell out billions again to prepare for 3G. That's some pretty expensive technology you got there.
Now let's look at the US economy. Alan and friends have been very aggressive with those rate cuts huh? "No to recession!" they seem to be chanting. But the dotcom meltdown isn't over at all. In fact, the massive debts of these technology companies will take their toll on financial institutions next. Imagine billions of dollars that cannot be collected. They may just find that their banking industry NPLs have already equaled ours. I wonder if they have a PNB counterpart. Yikes. In any case, the point is that an economy can be likened to a chain of industries. Prick one of those and expect the effects to spread. Let's spell contagion.
As for poor ol' country, well we better find an alternative major export market soon. It's either that or we focus on developing internal demand. What are the chances of that? Not optimistic I think.
Jollibee could be great in times like these. Can you think of a better cash cow? But even JFC is having a hard time maintaining its finances. For the first time in years, JFC had to resort to debt financing. Oh well, perhaps when that commissary is finally finished, we'll see a clean balance sheeted JFC again. SMC could be a candidate, but my principles cannot stomach recommending a Cojuangco-led company. What else? What else?
August 9, 2001
Are you scared yet?
For over a week now, we have been waiting for the market to give clearer signals as to the direction it will be taking in the short-term. We waited for such issues like PLDT, MER, MERB, BPI, AC, ALI and SMPH to weaken towards their respective support levels. We waited for the index itself to touch the 1280 level.
Now all of a sudden, that level has been breached, it just seemed vaguely possible. We believe a lot of the negative factors like the Abu Sayyaf terrorist activities in the south, the various scandals popping out left and right, and even the mind boggling budget deficit, have all been factored somewhat by the market. By factored, I mean we all know they're just out there, but we're numb already to a point.
That being said, we can really only point our fingers to the big foreign fund managers that have suddenly decided to liquidate their holdings here. And what timing to do so too. The market is well on its way to an 8-week downslide. Why they chose to dump their holdings now could be a sign of frustration or sadism towards us little investors. Well, that's what happens when you invest in a small-cap market. A little re-weighting of the porfolio and down goes the market.
So what's a good investment strategy? Personally, I think it's a time to buy. When you have big cap issues lingering dwelling in 8-year lows, there just has to be more upside than downside. Then again, I remember reading a commentary wherein we naturally believe things will improve in a year or so even if there are no fundamental reasons to do so. Well I have to admit, PLDT has never been a favorite. Not only is the IT community up in arms for the company's alleged monopolistic practices, there have been anomalies regarding the company's transfer of shares (remember Erap and Mark Jimenez?). Then again, as an investor, we have to recognize that PLDT, by virtue of its market capitalization is one of the few local issues that big fund managers will look at. Plus, it has positive earnings and cashflows for the first half of the year. That's a rarity among listed companies, given a backdrop of business closures and record unemployment levels. Obviously this means I bought TEL shares already. Yep, I did the same thing with AC and MERB.
What will you do?
August 1, 2001
A broad-based selling spree, led by a number of index heavyweights brought about a 29.18-point decline in the Phisix. We earlier reported that we see the index testing the 1300 psychological barrier soon, or perhaps even the 1288 level where a gap has yet to be covered, although we did not expect the intense selling pressure experienced by the market today.
Most of the credit should go to TEL, as it lost P45 and closed at P630, its intraday low. This level is already an acceptable buying level, although it may even hit P600, perhaps by tomorrow. The issue's nearest low was at P610, registered in early June. Before that, the last time TEL reached this low was in 1995. There are fears that TEL may again report below-par earnings as it did last year.
SMPH was also one of the major losers for the day, slipping 4.76% to P6. We suggest watching the issue as it nears oversold levels.
Combined foreign selling for the two issues reached P43mn, compared to the rest of the market which netted a net foreign selling figure of P36mn.
In marked contrast to the rest of the market, MFC reached another all time high, gaining a hefty P75 to P1585. SLC however is fast on its heels, rising by P10 today and closing just a shade lower than its all-time high of P1335.
AC finally reached P6, covering the gap at the same level. Oversold for over a week now, the issue could prove to be one of the leaders should the index wage a technical bounce at the end of the week. Buy.
MER lost a peso today, in line with the broad market's movements. The decline caused the issue to drop to an 8-year low.
MERB on the other hand lost P2 and is fast approaching attractive buying levels. We recommend buying the issue at P40 or lower.
LTDI, which has a short-term cap at P30, didn't get the chance to test it as the issue was weighed down by the gloom of the rest of the market. Furthermore, the company likewise reported disappointing results for the half.
July 19, 2001
The Peso performed mightily today, prompting us to wonder why the stock market did not take its cue from that. Then again, appreciating by a peso in half a day, we would all suspect this to be the handiwork of the BSP. Rightfully so, the bank exerted a little muscle to make speculators think twice before acting. Then again, exactly because it looks like an intervention, the peso's rally may be fleeting.
But even as the peso peaked at 53.1 to a dollar this morning, the stock market composite Index dropped by as much as 18.77 points, as large investors let go of their blue chips. The index did recoup a bit of its losses and by close only declined by 11.31 points, but clearly the order for the day was to sell.
Should the index decline by a little more than 10 points tomorrow, we believe a number of blue chips may just be perfect for bargain hunting. In fact we'll point out a number of them later.
In the meantime, the saga of SMC, Pepsi, RFM and Cosmos may finally be nearing its conclusion. Albeit both RFM and SMC disclosed that there are still issues being ironed out (such as valuation), it was reported that SMC was the chosen buyer. RFM's 85% stake in CBC will be valued at P14.5bn, inclusive of a P2.5bn goodwill money that will be distributed among RFM shareholders as dividends, and P1bn equivalent to CBC's total debt of the same amount. The same report indicated that at an P11bn net, CBC's shares would be valued at P5.20 or a 9.5% premium to CBC's closing price of P4.75 today.
With that arrangement, we believe there will be a dividend play for RFM. In fact, that seems apparent to investors already, as RFM gained 3.36% today to P2.46. The market likewise reacted favorably to SMC's "A" and "B" shares, which closed higher by P1.5 and P0.5, respectively.
AC today hit an intraday low of P6.4, although it didn't quite cover the gap at P6.3. But recovering from its low, the issue may now be in position for a technical bounce. However, should the issue be weighed down by the market's weakness tomorrow, it will become a more compelling buy.
BPC attempted to continue is impressive performance yesterday, rising 2.1% in midday, but was weighed down by the market's poor performance, and ended up a fluctuation lower at P1.88.
BPI lost a peso in today's session, thus falling to P69. At this point, the issue is in a precarious position and may fall below P68. Should that happen, the gap to be covered is at the P62 level. That spells a 8.9% potential drop in the near future. So it may be advisable to lay off the stock for a while.
PLDT dragged down the rest of the market with its poor performance, losing P30 to close at P660. A potential hazard for the issue would be a retracement all the way to P610. Should that materialize, PLDT will be a real bargain.
July 18, 2001
It would seem that today's strong performance is a fluke. After all, it would seem premature for any technical correction or bargain hunting to take place because there are no clear signals to indicate such. That aside, we've said before that speculation can be the only alternative valid reason for a rise. There was a buzz earlier than SMC has already won the bidding war for Cosmos, but then again SMC was not a strong performer today. Therefore we cannot attribute the rise to that issue. Then again, both SMC and SMCB registered intra-day upticks of P0.50, but there was much selling pressure on both and so the gains were pared in the end.
What makes the market's rise particularly "brave" is the fact that the peso weakened anew, breaching the 44 to a dollar level. In the morning session, the peso hit a low of 54.22, although the average was at a stronger 53.8. With this development, the BSP remained in the sidelines and once again said that it did not intervene directly in the market. However, with the depreciation unabated, some currency dealers have said that the BSP has no other recourse than to raise its overnight rates. The BSP also declined to do this. And so as it was over a week ago when then peso was threatening to breach the 52-level, the next move is with the BSP. Will it become a tradeoff between forex and interest? For sure the latter will have its adverse effects. Wasn't it just the other day when some dailies published that NPLs of commercial banks in May averaged 16.81%. And before that, the government's promised P125 hike of the minimum wage also threatened employer companies to a point that they feared closure and thousands of layoffs.
With all these unresolved, we reiterate our expectation that the market will see lower levels in the coming weeks. 1370 remains as our chief support level.
Meanwhile, there were a number of interesting developments that we believe should be noted. BPC rose mightily by 7.95% to P1.9. There hasn't been any news on the company, nor has the company made any disclosure lately, nor will it benefit from the volatile forex given its foreign debts. Well the rumors circulating is that the company may sell some assets, although such doesn't really warrant a spike in the issue's price.
RFM on the other hand finally succumbed to selling pressure after performing well with a backdrop of a dismal market. Just as well, since we've had a trading sell recommendation on the issue for a number of days now. RFM dipped by 6.67% to P2.38.
July 17, 2001
Dollars and Sells
We had a visibly depressed market today, as was to be expected. Following the peso's decline to a morning-low of 53.95 to a dollar, we could have in fact expected panic to set in to the stock market as well. That didn't quite transpire, although the PHISIX did lose 13.6 points by the end of today's trading session. Turnover swelled to almost P800mn coming from an average of under P500mn, but not because investors were rushing to liquidate their holdings. About half of the turnover was from a cross involving Pure Foods
(PF). The next most significant in terms of pesos traded would be PLDT (TEL), which continued to weaken despite the peso situation. The issue after all, is partially hedged because of its ADRs that are traded in the New York Stock Exchange (NYSE). Well not today it seems. TEL closed lower by P5 to P685.
However, it was not really PLDT that drove the market down, but San Miguel. The company's "B" shares which yesterday shot up by 7%, succumbed to selling pressure today, dipping by 2.8%. The issue closed at P52, but fell to as low as P51 in mid-trade. It's "A" shares lost P0.5 to P43.
RFM, on the other hand seems impervious even to a technical correction at this point. It gained another 2% today to P2.55 even as the company disclosed that it expects to come into an agreement with one of the buying parties (Coke or Pepsi) within the week. Then again, that particular disclosure has been coming out for weeks, so we would take it with a grain of salt.
Included in the minority of gainers today would be Digitel (DGTL), which had a subtle 2.04% uptick to P0.5. The company earlier disclosed that it would issue new shares to a strategic investor in order to raise funds. DGTL estimates a capex of $500mn over the next five years for its cellular operations. Apart from the equity infusion, the company also plans a $210mn bond offering.
We expect more downside from the market in the coming days. Since a continued correction did not materialize (with two out of six days closing up), the potential technical rally may be delayed. Already midweek, we would expect the market to inch down to the 1370 level, which is a safe support level. The worrisome peso situation will assure that. After all, the BSPs high-profile talk-down against speculators doesn't seem to be working at all. Lip service and the occasional direct intervention in the forex market seem to be the tools of choice by the BSP. The bank has been unwilling to raise its overnight rates, perhaps because of the adverse effects on the country's already out-of-control budget deficit (try P180bn). Still, it seems that rates are already on the rise, judging from the T-bill auctions yesterday, which saw all tenors rise. That may yet be another signal that the market will continue its descent.
July 16, 2001
Speculation on SMC
The story today, as has been for a number of weeks now, is San Miguel. The conglomerate, which is one of two major players in the softdrink industry bidding for CBC's 25% market share was bought up by 7% to P53.50 - a level which we haven't seen in SMCB for a while. However, with the entire market just accounting for P377mn worth of trades (inclusive of crosses), it wasn't such a daunting task. For SMCB, all it took was P35.5mn to merit the uptick. And this wasn't even because of any fresh news. It was just pure speculation. There was however, an SMC disclosure pertaining to the company's extension of the tender offer period for shares of Pure Foods Corporation, until August 13, 2001. Incidentally, should SMC's bid for CBC prove successful, RFM will be left with Swift, which will now face the combined force of SMC Foods and Pure Foods, further clouding RFM's future assuming a complete divestment of CBC.
As for RFM, the company finally submitted its audited F/S to the PSE, thereby avoiding penalties from the exchange, such as suspension of trades. In its statement, the company said it managed an operating income of P550mn in 2000, but registered a net loss of P520 due to a large P1bn foreign exchange loss on its dollar-denominated convertible bonds. Despite the dampener news however, RFM still rode on speculation and gained 12.61% to P2.5.
With the index once again failing to close above the 1400 level, we would suspect that there should be a number of bargains among blue chips and second liners already. In our search, we found AC, which is already oversold with a daily RSI of 6.362. The issue declined P0.1 today to P6.7. The issue looks attractive at this level already. However, should it cover a gap at the P6.3 level, it becomes all the more compelling.
Bankard, albeit not having felt the spotlight since it was acquired by RCBC, looks technically attractive right now. It was untraded today and last closed at P1.3. Buy on weakness.
FPH, which managed another P1.5 gain today and closed at P33 is very overbought, as both daily and weekly RSIs would show. The issue may breakout past P35.50, but will most likely correct first. It should retrace to the P30 level.
LTDI looks like it's on the verge of a correction. Unchanged at P27 today, the issue may hit P30 in the next few weeks.
July 11, 2001
Bagsak na naman, badtrip no?
The market failed to bounce back to the 1,400 level as the selling wave continued. Now down for a second day, the market which has been down week on week for the past three weeks is almost devoid of any volume. Usually, a large cross would push market turnover to within striking distance of the half-billion peso mark. Then again, this has been the case for the past months; wherein market volume suddenly spikes when something very relevant transpires, as when ex-President Estrada was ousted, or when the power bill was passed. Then as the news becomes factored into the prices, volumes once again start to dwindle and trends are lost. Before we know it, the market is just drifting aimlessly again.
During these periods, technicals and speculations become the primary direction-setters of the market. Well, the index is technically negative in both the daily and weekly charts. But like we pointed out yesterday, the main index is once again on the verge of being technically oversold. We see the major support level at 1370. At about that level, which may perhaps be reached within the week or early next week, we would suggest selective buying of blue chips. We'll see which ones will become attractive by the weekend.
The other factor moving the market, speculation has in fact been at the forefront of trading for weeks now. Starting with the usual talks of backdoor listing through mining stocks, the talks are now centered on SMC and its impending purchase of CBC from cash-strapped RFM. Latest news is that SMC has confirmed talks with RFM, and that the company hopes that the talks will be completed within the month. Purchase price for RFM's entire stake in CBC is now reportedly at P14bn. Today RFM and CBC managed a P0.02 and P0.1 gain, respectively. SMC "A" shares dipped by P0.5, while SMC "B" shares closed unchanged at P47.5. We have a sell on strength recommendation on RFM and CBC, and a buy on weakness recommendation on SMC "A" and "B" shares.
MERB, which was today's most actively traded issue lost P2 with over 900k shares changing hands. The issue is technically oversold already, although we believe it may still drop to around P48. We have a wait to buy recommendation for MERB.
Meanwhile, the latest slump of the market has been blamed on the peso's weakness. True enough, recent days have shown that the stock market has mimicked the peso. Thus, with the market's decline today, the peso also predictably weakened. In fact the peso, breached the 53 to a dollar level again. Perhaps in a couple of days, we may see the BSP intervening again. If that coincides with the index reaching 1370, we may see a good rally just yet.
July 10, 2001
A New Face
Hi! It's been a while since I actually updated the site in terms of aesthetics. I haven't taken a fresh look so to speak, nor have I even said a few words to thank the sponsors. What sponsors?! Anyway, I would like to greet my friend Patti a belated happy birthday. She's such a dear and remains BF-less as of this point. Hmmm...I believe I made a similar plug for my friend Jojo. Hmmm...a dating site in the works. Interesting.
And for your information, I don't just write boring stock market stuff. I also have an occasional urge to write short stories. Check out my most recent one.
I also had a stint as a fashion model (hehehe) which my mother refers to as my Abu Sayyaf pose. Heavens, I hope they all get gunned down.
I'm now using a different guestbook because my old one folded up. Eek. Shows you the extent of the dotcom crash doesn't it. Anyway, I'm using Dreambook now. So, if you've been aching to curse me for all my comments, I have a working guestbook once more. Hooray.
I'm currently doing a write-up for ABS-CBN. If you're interested in the stock, you may want to read through my short report. It's not yet finished. But then again, it won't be so for a couple of weeks. In fact, I haven't included my opinions yet. Nonetheless, it could be useful if you've been out of touch with the company in the recent months.
The company is planning to institute a share buy-back program. The purchased shares will be partly used for the company's stock option plan. The company's authorized buy-back numbers to 10mn common shares or 1.3% of the company's outstanding stock.
The move has fueled speculations that ABS will bail out its debt-saddled mother company, Benpres Holdings by buying back its own shares to prevent BPC's dilution. BPC earlier announced that it will sell up to 8% of its almost 60% stake in ABS to raise funds of about P2bn-P2.5bn. BPC's two units - Bayan Telecommunications Inc. and Maynilad Water Services Inc are plagued with mostly dollar-denominated debts amounting to around $1.3bn. That's when ABS clarified that the share buy-back will only constitute 10mn shares.
ABS is likewise keen on expanding overseas via the purchase of television stations, particularly in Indonesia, Malaysia and Thailand. However, the company is still in the process of determing the viability of such investments. This comes however, with an admission from the company that the growth prospects for the domestic market are already relatively limited.
Furthermore, the company believes that it will be limiting if Filipino programs only target the 70mn Filipinos, compared to the Spanish soap opera shows that cater to half a billion Latin Americans. ABS believes that it can produce programs of similar quality.
Thus, the company's core belief is that future growth will be propelled by new markets in terms of both region and content platforms (such as television, publishing, cable and Internet). In fact, ABS-CBN International, which accounted for 12% of the company's revenues for 2000 will contribute about 15%-16% this year.
The company announced that its first quarter income grew by less than a percent to P420.169mn from P418.657mn last year. Revenues were up 17.43% to P2.115bn, despite the declines by radio and sports revenues. TV-VHF growth was at 15%, and accounts for 90% of airtime revenues. The company also garnered a 44% market share in Metro Manila. The revenue growth was also partially attributable to the consolidation of Studio 23. Nonetheless, the topline growth was overshadowed by the 26.3% spike in operating expenses to P1.652bn from P1.308bn.
The company has planned capital expenditures worth P3.5bn for 2001, of which P2.3bn will be sourced from the company retained earnings. The rest will be funded through internall generated cash and new borrowings. Of the P3.5bn, P1.5 will be used for normal maintenance while P1.0bn will be used to complete three new digital studios being built behind its present complex. Another P500mn will be used for "digitalisation" of content, while the remaining P500mn will be used to fund the company's expansion to the Middle East. Next year, the company will push through with its plans to build a theme park.