PSE Points to Ponder

A Philippine Real Estate Investment Trusts (REIT) is a stock corporation established in accordance with the Philippine corporation code. The present corporation code in the Philippines is Republic Act No. 11232 (RA 11232). For purposes of clarity, a REIT, although designated as a “trust”, does not have the same technical meaning as “trust” under existing laws but is used for the sole purpose of adopting the internationally accepted description of a company owning income-generating real estate assets in accordance with global best practices. A Philippine REIT is not a “trust” created under trust laws of the country but a corporation created in accordance with the corporation code. What make a corporation a Real Estate Investment Trusts (REIT) is governed by the Republic Act No. 9856 (RA 9856) known as “The Real Estate Investment Trust (REIT) Act of 2009.” The law was enacted to to promote the development of the capital market, democra...

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...

AREIT debuted in the market with a 27 per share public offering. At that time we said that buying AREIT at 27 could inflict capital loss as the market will have to price it down to set the appropriate yield for AREIT which could be around 5.5% to 7%. At the time AREIT was listed in the market, dividends were not set, so we anticipated that AREIT will have to move down towards a zero dividend yield until dividends are declared . AREIT indeed plunge to a low of 24.10 a share. AREIT eventually declared dividends and set a dividend policy. At the current level of dividends and at the current price of 25.60 a share, AREIT’s yield is at 4.82%. AREIT may still move downward towards a yield of 6% to 7% inflicting holders further capital loss. Double Dragon Properties Corp. ( DD ) had issued cumulative, non-voting, non-participating, redeemable at the option of DD, convertible at the ratio of 1 preferred share to 1 common share, perpetual Preferred Shares now trading as DDPR . D...

On August 12, 2020 Henry “Big Boy” Sy. Jr. moved 15,000,000 common shares of SM Investments Corporation ( SM ) from his brokerage account to a corporation which is also a controlling stockholder of SM. The transaction was crossed at 863.50 per share for a total of around 13 Billion Pesos. This transaction was disclosed by SM on August 20, 2020. You can notice this transaction on the chart below – the towering green volume. Again on August 27, 2020, a transaction of similar size -15,000,000 common shares – crossed at the stock exchange at 880 a share for a total of 13.2 Billion Pesos. The transaction was facilitated by the brokerage BDO Securities Corp. BDO Securities Corp. is different from BDO Nomura Securities Inc. which is the retail brokerage of BDO Unibank Inc. ( BDO ). You can notice this transaction above by the towering red volume. The transactions are intriguing. Meanwhile, Cemex Holdings Philippines, Inc. ( CHP ) is selling hot. In a one-month p...

First Gen Corporation ( FGEN ) and subsidiaries earned $183 Million for the period 1H 2020. What is better is that it was able to translate such earnings into cash from operations of $302 Million. The cash generated from operations allow FGEN to bolster its liquidity. FGEN’s balance sheet has a cash of $748.7 Million as of end of 1H 2020. That is an increase of 20% from the end of 2019. Only around $36.7 Million were used by FGEN for capital expenditures. This is a testament to the efficiency and flexibility of operating a natural gas power plant. The low capex allows FGEN to pare down its debt. Long-term debt was down by around $200 Million from $1.6 Billion to $1.4 Billion. FGEN is an efficient and a flexible power company but underappreciated by the market. FGEN is undervalued. FGEN’s undervaluation by the market has been noticed by KKR , the giant US private equity pioneer. Just this June KKR through its Valorous Asia Holdings Pte. Ltd. made a tender offer of 22...

TEL has been gradually accumulating debt. As of June 30, 2020 (1H 2020) total long-term debt of TEL is at 199.7 Billion Pessos. That is a significant 28.2% increase from 155.8 Billion Pesos as of the end of December 31, 2018. It can be remembered that on October 2019 TEL initiated a consent solicitation from bondholders to amend certain provisions in the indentures to allow TEL to borrow more money without breaching any debt covenants. TEL has to borrow more in 2019 because it has to fund its massive capital expenditures. In 2019, TEL spent 88 Billion Pesos for network and infrastructure. TEL has to catch-up on network and infrastructure investments as the third telco rolls out its network and telecom infrastructure . Over the years while it grew debt, TEL did not invests aggressively on its infrastructure. Over a three period from 2016 to 2018, TEL’s investment on its infrastructure averages to only 42 Billion Pesos. TEL was among the early companies to dip into borrowings ...

Gold  prices have surged in the wake of the  COVID-19  pandemic as investors look for safer places to park their money. The jump in gold prices has boosted investors’ willingness to pump billions into the gold mining industry. Warren Buffet’s Berkshire Hathaway Inc. added to its portfolio a Canadian gold miner, Barrick Gold Corp. In the past, Warren Buffett, the billionaire chairman of Berkshire, cautioned against investing in gold because it’s not productive like a farm or a company . Now with the jump in gold prices, gold miners are benefiting from surging bullion prices that are boosting profit margins as costs of production have steadied, making them increasingly attractive investments. Investors interest in gold miners has also caught Apex Mining Company, Inc.’s ( APX ) shares. APX is also trading like gold. APX is controlled by the port and gaming tycoon, Enrique K. Razon Jr. through his holding company Prime Metroline Holdings, Inc. which own 40....