PSE Points to Ponder

Cemex Holdings Philippines, Inc. ( CHP ) at 1.46 a share has a market capitalization of 19.69 Billion Pesos while Holcim Philippines, Inc. ( HLCM ) at 5.94 has a market capitalization of 38.33 Billion Pesos. For 1H 2020 HLCM generated 11.4 Billion Pesos of sales while CHP generated just 9.6 Billion Pesos. HLCM was able to translate it sales to cash from operations of 2.4 Billion Pesos while CHP was able to generate cash from operations of a neglible 0.26 Billion Pesos. CHP is saddled with long-term debt of 11.1 Billion Pesos while HLCM is free from long-term debt. Aside from the debt burden, CHP’s balance sheet carries a 27.9 Billion Pesos goodwill which doesn’t count for much given the present COVID-19 pandemic and as evidence by its operating results over the years. The massive goodwill of CHP was created to justify the pricey acquisition of the 40% interest in Solid Cement and Apo Cement which that at that time it didn’t yet own. CHP argued that the massive g...

Cemex Holdings Philippines Inc. ( CHP ) in a press release has disclosed that it had reached an agreement to amend its debt covenant with BDO. The debt agreement amendment was meant to defer the compliance of certain financial covenants until June 30, 2021. It could be surmised from that disclosure that had the financial covenants not been amended CHP may have not complied that certain covenant. The COVID-19 pandemic may have worsen its operating and financial performance making it difficult to stay with the financial covenant with BDO. The stock rights offering at 1.54 per share have raised additional capital of 12.8 Billion Pesos to CHP but 7.9 Billion of the new capital raised were used to pay the parent CEMEX. It can be noted from CHP’s latest presentation that no additional funding from CEMEX was highlighted. Despite all the negatives, CHP has seen gradual rise. With the fundamentals so bad – negative free cash flows of 1.9 Billion Pesos and debt covenant amendme...

CHP debuted in the Philippine Stock Exchange through an initial public offering at a price of 10.75 Philippine Pesos per share raising a total of 25.1 Billion Philippine Pesos. The proceeds of such fund raising were all paid to the parent company CEMEX of Mexico. Proceeds of the IPO was not even enough, CHP borrowed around 14 Billion Philippine Pesos from BDO to make additional payment to the parent CEMEX of Mexico. Despite those payments CHP still owe the parent 1 Billion Philippine Pesos. How did CHP became indebted to CEMEX? CEMEX sold the 40% of the operating companies Solid Cement and APO Cement to CHP. The acquisition of the 40% shares of the two operating companies created a goodwill of 27.9 Billion Philippine Pesos, that means the 40% shares of Solid Cement and APO Cement were acquired at around 40.1 Billion Philippine Pesos and of that purchase price only around 12.2 Billion Philippine Pesos could be attributed to tangible assets such as cement plants, equipment, machin...