PSE Points to Ponder

We have earlier commented that the COVID-19 pandemic had a significant adverse impact on the operations and finances of DMCI Holdings, Inc. ( DMC ) during the first half of 2020 (1H 2020) which resulted to a weaker financial footing for DMC as of end of 1H 2020 . The weakness in the results of DMC sent it shares plummeting to a low of 3.40 a share almost revisiting the 3.10 a share low at the height of the sell down in March 2020. The Consunji’s took advantage of the weakness in the share price of DMC, accumulating DMC shares along the way. We have commented earlier that the Consunji’s private holding company, DFC Holdings, Inc., had accumulated a total of 55,425,100 DMC shares as of the end of August 2020 . It appears now that DFC Holdings is not yet done accumulating DMC shares. For the first two weeks of September 2020, DFC Holdings bought 3,892,000 DMC shares. The Consunji’s accumulation of DMC shares signals that they have the operational and financial expertis...

First Gen Corporation ( FGEN ) is currently investigating the condition of the generator of its 414MW San Gabriel Combined Cycle Power Plant following a trip. The initial investigation, which is being carried out by specialists from Siemens Power Operations Inc., indicates that there is an electrical fault in the generator, and pending completion of the inspection, the plant has been declared as unavailable for dispatch. First NatGas Power Corp. (FNPC) is the project company and operator of the 420 MW San Gabriel natural gas-fired power flex plant. FNPC is a wholly owned subsidiary of AlliedGen Power Corp. (AGPC) which is in turn a wholly-owned subsidiary of FGEN. As of end of 1H 2020, San Gabriel Combined Cycle Power Plant contributes US$97.3 Million to the revenues of FGEN. In March 2018, FNPC was awarded a six-year Power Supply Agreement (PSA) by Meralco for 414 MW of San Gabriel’s baseload capacity after undergoing a Competitive Selection Process (CSP). The sale of electricity t...

In April 2020 at the height of the community quarantine , Shang Properties, Inc. ( SHNG ) distributed a cash dividend of 0.11250 a share. Based on the preceding years, SHNG also distributes dividend every September at a rate of .07 a share. This year SHNG’s second round of dividend amounted to 0.044 a share. In all, the total for 2020 SHNG cash dividend will be 0.1565 a share. With SHNG market valuation slumping, SHNG now yields 5.75%. A very attractive yield for dividend investors. In the first half of 2020, SHNG was able to earn a net income of 700 Million Pesos, understandably that would be down as compared to the same period in 2019. At the height of the community quarantine, SHNG was able to generate cash from operation of 541 Million Pesos. SHNG even was able to pare down debt with its own cash balance. In these times, SHNG’s primary source of cash generation will be the office space rentals from the Enterprise Center, an office building located at Ayala Avenue co...

SSI Group, Inc. ( SSI ) is a specialty retailer in luxury, bridge, casual, fast fashion, footwear, accessories and luggage. COVID-19 pandemic mitigating measures shrunk SSI’s 1H 2020 sales by 49% as compared to 1H 2019. The decline in sales resulted to a net loss of 476 Million Pesos for SSI. SSI’s gross profit margin remained healthy at around 46%. Despite the healthy profit margin, SSI resulted to a net loss because of its massive opex (operating expenses). Agile companies adopts to emerging circumstances. They are flexible in their cost structures. They can ramp up in times of surging demand and can scale down their costs fast in times of downturn. SSI’s 1H 2020 operating expenditures show that their is an increase in the depreciation and amortization of about 541 Million Pesos. That is 130% larger than the 1H 2019 depreciation and amortization. Depreciation and amortization are non-cash expenses. SSI would have generated cash from operations of around 610 M...

A. Soriano Corporation popularly known as Anscor ( ANS ) is an investment holding company with a hedge fund like operation with almost half of its assets in a trade portfolio (fair value through profit and loss investments/FVPL) which amounted to around 11 Billion Pesos as of December 31, 2019. The market turmoil brought about by the COVID-19 pandemic shed 1.2 Billion Pesos of market value from its trading portfolio. The market turmoil is an opportunity to snap up undervalued assets to those investment holding companies with sufficient liquidity. ANS is caught with no enough liquidity, thus, it is not poised to take advantage of the depressed valuations of assets brought about by effects of the pandemic. It is good that ANS is not leveraged and therefore is not under pressure to liquidate its portfolio at depressed valuations. It liquidated only about 700 Million Pesos of its portfolio at most likely break-even price to raise cash to support its dividend distribution in March 2020. ...

DFC Holdings, Inc. is one of the private holding company of the Consunji family’s investment in the listed DMCI Holdings Inc. ( DMC ). The other being the DACON Corporation. DACON Corporation and DFC Holdings, Inc. are the principal stockholders of DMC, holding 51.51% and 17.92% of the outstanding shares of DMC as of end of 2019, respectively. DFC Holdings, Inc.’s 17.92% holdings in DMC as of December 31, 2019 is equivalent to 2,379,799,910 shares. COVID-19 pandemic restrictions severely impacted most of the operations of DMC weakening its finances triggering the market to lower the valuation of DMC. DMC dip to a 52-week low of 3.10 a share. The dip in the share price of DMC gave DFC Holdings, Inc. the opportunity to snap up DMC shares. All throughout 2020, DFC Holdings, Inc. bought a total of 55,425,100 DMC shares to increase its holdings to 2,435,225,010 shares as of end of August 2020. For August 2020 alone DFC Holdings bought 13,485,000 DMC shares costing it 50...

DMCI Holdings, Inc. and subsidiaries ( DMC ) reported a consolidated net income of 3.1 Billion Pesos for the first half of 2020 (1H 2020). Although it reported a net income of 3.1 Billion Pesos it did not generate cash from operations. Worse is that its capital expenditures for the period required 3.2 Billion Pesos. The cash burn for 1H 2020 of DMC was around 6.9 Billion Pesos reducing its cash balance to just 14.7 Billion Pesos at the end of 1H 2020. The 14.7 Billion Pesos cash balance looks massive but if you look at the debts due in the next 12 months of 16.3 Billion Pesos it would be worrisome. It is worrisome because there is no significant cash coming from operations. Its biggest hope is its biggest unit Semirara Mining and Power Corporation ( SCC ) which has the biggest potential to generate cash from operations but its situation also looks bleak. SCC has a cash balance as of end of 1H 2020 of 3.8 Billion Pesos but the debts due in the next 12-month period is at 8.2 Billion ...