Skip to main content

$GLO could skyrocket if it scraps dividend to heed DU30 calls for network investments

The 1H 2020 results of Globe Telecom (GLO) showed a slowdown in the net cash flows from operating activities by -31% to 24.3 Billion Pesos. The result marked the effect of the COVID-19 pandemic on the telecommunications industry in the Philippines.

The slowdown in the operating cash flows indicates that it has to conserve cash. Let it be noted that Globe was fast in letting go of its employees and in closing some of its store fronts.

Globe has to conserve cash especially that based on its first half results it has total loans payable before the year ends of 22 Billion Pesos while its cash balance stood at only 14.8 Billion Pesos. It has limited resources at it disposal at this time.

With cash flows from operations slowing, GLO has to borrow more to fund its capital expenditures. With no less that the President of the Republic calling them to improve their services before the year ends, Globe can not abandoned their capital expenditures using the pandemic as an excuse. The President gave the telcos the marching order to look for capital to improve their services. The President even said that if you don’t have money you don’t do business, showing the President’s deep knowledge on how our telcos are financially run.

Over the years Globe has funded its cash dividends from borrowings. Globe borrows money to pay cash dividends and debts while capital expenditures are funded from revenues or cash flows from operations. This is generally the trend over the years. Only in 2019 that Globe did not borrow money to pay dividends because it has stellar cash flows from operations (74 Billion Pesos from 58 Billion Pesos in 2018) but even then the cash dividend drastically reduced its cash balance at the end of 2019 to just 8.3 Billion Pesos. No one has expected the pandemic, Globe may then have been expecting another stellar year in 2020.

With a low cash balance to start with plus a weak operating cash generation, it has to borrow money to fund their capital expenditures to improve their services as called for by the President. The demand for capital expenditures and for the repayment of debts falling due this year under a weak cash flow generation regime requires Globe to borrow money.

The borrowing requirements for capital expenditure and debt repayment will leave a little space for borrowing for cash dividends.

For now the indicative dividend yield for GLO is at 4.7%, that could go down to zero.

Of course that could only go down to zero if the Ayala Group will choose to bow down to the demands of the President and the public. Or they could play down capital expenditures and choose to reward themselves and the other GLO stockholders and investors. Or they could choose to borrow more for capital expenditures, debt repayment, and cash dividend risking putting the company to a point of unsustainability. It is worth following up in the next quarter.

Should GLO scrap its dividend and instead use the scant resources available for network improvements then it would be very positive for its stock price. Massive investment in networks signals growth. Shares can sky rocket.

Disclaimer: This is an independent analysis with the objective of informing readers about company fundamentals. Accuretti Systems Inc. does not own any shares of Globe Telecom.

Labels:

Comments

Post a Comment

Popular posts from this blog

The Ayalas didn’t “lose” Alabang Town Center—They cashed out like disciplined capital allocators

We’ve been blogging for free. If you enjoy our content, consider supporting us! If you only read the headline—Ayala Land exits Alabang Town Center (ATC)—you might mistake it for a retreat, or worse, a concession to the Madrigal–Bayot clan. But the paper trail tells a more nuanced story: the Ayalas weren’t unwilling to buy out the Madrigals; they simply didn’t need to—and didn’t want to at that price, at that point in the cycle. And that’s exactly where the contrast with the Lopezes begins. In late December 2025, Lopez-controlled Rockwell Land stepped in to buy a controlling 74.8% stake in the ATC-owning company for ₱21.6 billion—explicitly pitching long-term redevelopment upside as the prize. A week earlier, Ayala Land (ALI) signed an agreement to sell its 50% stake for ₱13.5 billion after an unsolicited premium offer —and said it would redeploy proceeds into its leasing growth pipeline and return of capital to stakeholders. Same asset. Two mindsets. 1) Why buy what you already co...
Post a Comment
Read more

From Meralco to Rockwell: How the Lopezes Restructured to Put Rockwell Land Under FPH’s Control

  The Big Picture In the span of just a few years, the Lopez family executed a complex corporate restructuring that shifted Rockwell Land Corporation firmly under First Philippine Holdings Corporation (FPH) —even as they parted with “precious” equity in Manila Electric Company (Meralco) to make it happen. The strategy wove together property dividends, special block sales, and the monetization of legacy assets, ultimately consolidating one of the Philippines’ most admired property brands inside the Lopezes’ flagship holding company.  Laying the Groundwork (1996–2009) Rockwell began as First Philippine Realty and Development Corporation and was rebranded Rockwell Land in 1995. A pivotal capital infusion in September 1996 brought in three major shareholders— Meralco , FPH , and Benpres (now Lopez Holdings) —setting up a tripartite structure that would endure for more than a decade.  By August 2009 , the Lopezes made a decisive move: Benpres sold its 24.5% Rockwell stake...
Post a Comment
Read more

Power Over Press: How the Lopezes Recycled ₱50 Billion—and Left ABS‑CBN to Fend for Itself

  We’ve been blogging for free. If you enjoy our content, consider supporting us! Disclaimer:  This is for informational purposes and is  not  investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs. What the Lopez Group’s ₱50‑billion decision says about First Gen—and ABS‑CBN When Prime Infrastructure Capital Inc., led by Enrique Razon Jr., completed its ₱50‑billion acquisition of a controlling stake in First Gen’s gas business , it was widely framed as a landmark energy transaction. Less discussed—but no less consequential—was what the Lopez Group chose to do next with the proceeds. Rather than channeling the windfall toward shoring up ABS‑CBN Corp. , the group’s financially strained media arm, the Lopezes effectively recycled that capital back into the energy sector , partnering again with Prime Infra—this time in pumped‑storage hydropower projects that will take year...
Post a Comment
Read more