Solid Group, Inc. (PSE: SGI)

Solid Group, Inc. (PSE: SGI)

The Solid Group, Inc. (Company, SGI) is primarily engaged in sale of mobile phonesprefabricated modular house & offices, and real estate. Below are the Company’s subsidiaries:

The Company’s main source of revenue is its sale of mobile phone, broadcast/professional equipment & accessories, and prefabricated modular houses which composed the 76% of the total revenue of 2011. Sale of mobile phone through its subsidiary, My Solid, contributed the most in the Company’s revenue growth. Mobile phone units sold in 2011 jumped to 2 million units from 739,721 units in 2010 or a revenue growth of 94% from P1.4 million in 2010 to P2.9 million in 2011.

The Company sells the mobile phone brand Myphone. Myphone is distributed by a wholly owned subsidiary Mytel Mobility Solutions, Inc. (Mytel) through 260 independent dealer networks. Effective June 1, 2012, My Solid and Mytel will be merged with the former as the surviving entity.

An interesting development in the Company is the restructuring of its corporate structure to focus on real estate business and sale of mobile phones under the brand name Myphone. Except for 2010, the company exhibited double digit growth since its venture in Myphone distribution on 2007.

The Company’s real estate investments include the Golden Hill Project, a property within the ASEAN Commercial Park in Nanning City, Guangxi Province, PRC. The Company, through Fil-Dragon, pre-sold the multi-storey residential and commercial condominium of Golden Hill Project. The Company received P29 million and P686.3 million in 2010 and 2011 respectively in the pre-sale.

The Company, through ZTC, started the construction of Tri Towers condominium building in 2007. The location map of the project is seen below:

Tower 1 was fully completed in 2009 and construction for Tower 2 was started in 2011. The construction of Tower 3 has not yet started.

The Company estimates to spend P650 million capital expenditures for 2012 for real estate and broadband infrastructure. This expenditure shall be lessened as the Company sold the assets of its wholly owned subsidiary Solid Broadband Corporation (SBC) for a consideration of P 1 billion cash on May 11, 2012. The assets are sold to Skycable Corporation. [1] I estimated the company to recognize a gain of 300 million in this transaction since net assets of SBC are recorded in the books of the Company at P667 million as of 2011.

The Company has the following risks on its assets:
1.   Risk of expropriation under the Agrarian Reform Act of its properties in Pililla, Rizal and Pamaldan, Cabanatuan City with a carrying amount of P3.3 and P7.9 million respectively.
2.   A land with a carrying amount of 309 million is subject to claims by third parties.

In 2005, ZTC received notification from Urban Roads Project Office (URPO) of the Department of Public Works and Hughways (DPWH) that the location of the Tri Towers condominium might be affected by the plans of the National Government of the Philippines for the construction of the proposed 2nd Ayala Bridge. However, the URPO stated that it has not yet undertaken the detailed engineering design that will ascertain if the location of the ZTC’s property will be affected by the road’s right-of-way.

Other data:

Sources:

1.   Additional information re: Agreement between Solid Broadband Corporation and Skycable Corporation http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-3906_SGI.pdf

PD. No SGI shares

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