Emperador Backdoors to TSI

Just a flash analysis:

Expected contribution of Emperador to AGI’s net income in 2012 is 4 billion.

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-6787_AGI.pdf

 Use a PE ratio of 10 you’ll have a market cap target of 40 billion. Divided that by 15 billion shares subscribed will give a target price of 2.66.

 Use a PE ratio of 30x to consider the growth potential of Emperador to arrive at a market cap of 120 billion, you’ll get a target price of P8.

I find it not attractive.

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.

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The Moon, ANC- On the Money, Stock thoughts: MPI, AGI

The Moon

The moon was wonderful last night. (pardon my poor photography skills)

moon1

moon2

moon3

The ring around the moon is not a camera trick (or whatever the term should be.lol). It does look like that last night.

 

ANC- On the Money

If you have a chance, try watching today’s episode of ANC’s On the Money. They have an insightful guest.

Or you can wait until it is uploaded here:

http://www.youtube.com/user/ANCalerts/videos?query=on+the+money

They usually upload a week old video.

 

MPI, AGI

An investment lesson for me: In times of good economic condition, a company raising cash either through equity or debt issuance to invest in good businesses is not always a bad thing.

MPI and AGI are companies that generate low cash flows relative to the business that they are in. Therefore, it is obvious that both companies will raise more cash in the future to fund their growth.

I thought the increase in debt to equity ratio of these companies will shun the market due to the increase of risk that they are taking and value them lower. I am wrong.

A disclosure of MPI raising funds through equity issuance:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-0704_MPI.pdf

I expect MPI and AGI to raise more funds this year.

Mike Ferrer, Stock Thoughts: PRC, AGI

Mike Ferrer

One reason to subscribe in Business World’s free business dailies are the quality columns written by Mike Ferrer every Monday.

Read his column on January 14, 2013: “The Long and Short of it”

http://www.bworldonline.com/assets/subscribe.php?id_subs=digit

 

PRC

Leisure Management (Hong Kong) Limited is selling plenty of PRC shares:

http://www.pse.com.ph/resource/corpt/2013/PRC_23B_01142013.pdf

http://www.pse.com.ph/resource/corpt/2013/PRC_23B_01142013_1.pdf

 

AGI

Interesting business development for AGI:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-0396_AGI.pdf

AGI’s cash cow has always been their Emperador Distillers, Inc. subsidiary.

 

Fiscal Cliff, Stock Thoughts: AGI, TA

Fiscal Cliff

Ok. Everything is alright… for now. Let’s wait for 2 months and fear will again ensue regarding this matter.

In my opinion, we should acknowledge the psychology of incentives. Who would like to be blamed for the recession of their country? Obviously it will be alright.

(Warning: oversimplified rationale)

 

AGI

Nothing but looking at a stock I sold (not in my own account) at 16.40~16.68 soar to 16.80. Anyway, a gain is a gain.

 

TA

Wohoo! TA exceeded my valuation of 1.27 due to this disclosure:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-0002_TA.pdf

What does it mean?

The transaction will cause an incremental EPS of .06.

Since we have no 2012 EPS yet, let’s assume that TA’s adjusted 2011 EPS is the same for 2013 at .10. Adjusted EPS of TA for 2013 will be .16 (.10 + .06) in 2013.

How to calculate the incremental EPS?

TA power has 532 M net income in 2011 and only half of that is earned by TA. What I did is consider the other 50% of the 532 M and divide by 4.3 billion shares and I get the incremental EPS of .06.

Tell me if my math is wrong.

 

 

PSEi, Stock and Family, Speculative vs. Investment

PSEi

Index at all time high again and trading at high multiples.

When should one be worried? You should be worried if the company that you are investing does not have any promise of future earnings growth.

Is it time to buy?

I’m patiently waiting.

Stocks and Family

Last December 2011, Me and my client allocated plenty AAI. As some of you might have remembered it was very volatile at 25~35 range. During Christmas and New Year, we find our portfolio at negative 50%. I feel bad about it and have that unusual feeling in my stomach. I enjoyed the moment with my family but my mind just reverts back to my stock.

January 2012, I sold all my AAI stock for a 100% profit.

From that date on, I limit my speculative holdings to just 20% of my portfolio and I learned to disconnect my ego from my bank account. Never again an activity I passionately do distract me in my time for my family!

 

Speculative vs. Invesmtment

What exactly is a speculative and what is an investment?

A stock purchased for speculative and for investment purpose does not differ on the time frame but on the amount of information available prior to the purchase that can promise us safety and returns for our capital.

Stocks I consider an Investment

FGEN, AGI, PCOR, CHIB, and EDC are companies that allow us to project their earnings based on the readily available information that only requires number crunching.

Let’s have FGEN, FGEN derives 90% of their earnings from sale of electricity to MER. Electricity demand is almost certain not to decline dramatically so we can easily project FGEN’s earnings in the coming years.

Stocks I consider Speculative

LPZ, APX, GREEN are speculative.

APX is speculative since the mineral reserve estimates are not yet disclosed and that we are not sure if the increase in APX’s capacity can be met by APX’s reserve. Current APX reserve can only last for 5 years should the capacity be tripled.

LPZ is speculative since GLO buying LPZ’s BTI is in the mind of GLO’s decision maker.

GREEN is speculative since we have no comparable operating years to project earnings.

Why did I buy these shares?

Because, IMHO, the odds are very much skewed to the speculator’s favor. 🙂

APX to announce a substantial mineral resource is very likely.

LPZ’s BTI to be eventually purchased by GLO is very likely.

GREEN’s management declaring property dividends to increase shareholder value is very likely.

Severe Eye Strain and Stock Thoughts: AGI, GREEN, & LPZ

I had a severe eye strain in the past two days. I am not the type of person that easily complains about the pain I feel but last monday 2:30 AM. My headache is just unbearable. I immediately met my ophthalmologist and I was advised to take 2 days off.

http://www.medicinenet.com/eye_strain/page4.htm

I did not look at my laptop or tv for 2 days and I’m feeling good now.:)

AGI

Gosh AGI! What are you talking about hiking CAPEX by P40B next year?!

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8765_AGI.pdf

Where would AGI source the needed cash? Through a combination of debt and equity issuance?

AGI should make sure to generate enough returns for the P40B capex. I am looking forward for AGI’s future disclosure regarding where they will spend the P40B.

I have a projected debt to equity ratio of .96 for AGI which is at par to MPI’s and JGS’.

GREEN

Nice one GREEN. 🙂

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8732_GREEN.pdf

Ever wonder where will they will source the P667 million? The conditions appear to be favoring the live case study.lol

LPZ

Latest disclosure that might affect LPZ:

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8744_GLO.pdf

GLO did not increase the tender offer price to $310 to attract more BTI debt but it is in accordance with the stipulated conditions:

  1. $280, if the acceptance level is less than 75%
  2. $290, if the acceptance level is greater than 75% but less than 80%
  3. $300, is the acceptance level is equal to or greater than 80% but less than 85%
  4. $310, if the acceptance level is equal to or greater than 85%

Currently 90+% are tendered.

To recall, the tender offer shall be valid if:

  1. At least 70% of the remaining principal amount of BTI debt is tendered
  2. At least 70% of the principal amount of RCPI debt is tendered.

Good news! GLO waived condition #2.

To my understanding, we could expect GLO to disclose between the dates December 11-13 or on December 21 (the settlement date) a press release regarding a successful tender offer.

Selected stock updates: MER, PRC, AGI, GREEN

MER

This morning, news came out that MER’s credit rating was upgraded by S&P to B+ from BB-.

http://www.bworldonline.com/content.php?section=Corporate&title=S&P-gives-Meralco-higher-credit-grade&id=62110

As a result, MER’s price went up by 3.53%.

My take, MER is undervalued even at current prices. Franchise alone is worth P380/share (See comments section of MER stock report). IMHO, a P300 price before year end is very possible.

Short term investment strategy: Buy and hold until the Open Access and Retail Competition (OARC) which is on the second half of 2013.

Long term investment strategy: Hold 5 – 16 years.

 

PRC

Just as I thought there are no more sellers in PRC, ATR came out with so much more shares. Anybody have an idea when ATR will exhaust all his shares?

 

AGI

AGI confirms their intention to spend $1.5 billion for Resorts World.

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8586_AGI.pdf

Good news! With the following assumptions:

Return on Assets (ROA) = 5%

Outstanding shares = 10 billion

Forex rate = P 40

The estimated 1.48 increment in its intrinsic value depends on when and how AGI will spend the $1.5 b capex.

 

GREEN

 No news or disclosure except that it’s down 11% from my initial entry.lol