Direct Selling, Cheap Stock, Stock thoughts: CAL, LC, GLO, MPI

Direct Selling

I met a lot of people who are into direct selling. If you are one of them, Anton English has a lot of tips to offer:

http://antonenglish.com/three-things-that-will-have-me-running-for-the-hills/

 

Cheap Stock

What does a cheap stock really mean?

http://www.adventuresincapitalism.com/post/2010/03/15/What-Does-Cheap-Really-Mean.aspx

In my opinion, the above article describes Warren Buffett’s investment style. Warren Buffett looks at the future of business and values it while Ben Graham looks at the history of the business and values it. That is the stark difference between the master and the student.

 

CAL

CAL declared cash dividend of P.25:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3115_CAL.pdf

The reason they declared the cash dividend is “significant revenue growth”. I agree, but at CAL’s earnings per share of P.32, a cash dividend of P.25 means giving away 78% of the earnings.

They should have conserved more cash for the business.

My opinion only.

 

LC

LC is trying to convert their MPSA (mineral production sharing agreement) to FTAA (Financial or Technical Assistance Agreement) within this year.

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3126_LC.pdf

This means that their foreign partner may be able to proceed to the development of LC’s mineral claims.

More about LC’s FTAA:

https://fundamentalenthusiast.wordpress.com/2012/10/20/investing-in-lepanto-consolidated-mining-inc/

I wonder how they will circumvent EO79 with regards to FTAA….. We’ll see. 🙂

 

GLO

GLO eyes complete takeover of Bayantel:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3135_GLO.pdf

Of course, why else would they buy Bayantel’s debt? lol

Looking forward for more disclosure. 🙂

 

MPI

As some of you may have noticed, Deutsche is selling a lot of MPI shares. Considering that MPI failed to get the express way project, Deutsche’s valuation model could probably be impaired. Thus, it should be expected that they will sell more of their position in the coming days.

Gold Plunges, Stock thoughts: CPG, SMC, MPI

Gold Plunges

A good article presenting valid reasons for the decline of gold price:

http://www.interaksyon.com/business/59519/gold-prices-plunge-to-lowest-level-in-2-years

As long as gold prices won’t go down below $1,000 there is nothing to worry about. If it does then APX would operate at a loss again and PX’s income would be trimmed a lot.

CPG

CPG declared cash div:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3087_CPG.pdf

CPG should have not declared cash div. Management should have plowed the cash back to the Company.

My opinion only.

SMC

Yesterday I asked how SMC will fund their projects, I guess it would be through this $2 B note:

http://www.bworldonline.com/content.php?section=Corporate&title=San-Miguel-readies-up-to-$2-B-debt-notes&id=68715

MPI

MVP group also raised some capital through First Pacific’s $400 million international bond offering:

http://www.philstar.com/business/2013/04/16/931056/mvp-set-expansion

They claimed it was 7.5x oversubscribed.

MRT Buyout in the Point of View of APO

According to APO’s SEC filings, APO has an 18.90% interest in Metro Rail Transit Holdings Inc. (MRTHI). MRTHI has 84.90% interest in MRT Holdings II (MRTH II) which in turn owns 100% of Metro Rail Transit Corp. (MRTC). [1]

In 2001, APO entered into a Sale Agreement with TBS Kappitel Corporation Pte. Ltd (TBS) to sell future cash flows from the MRT 3 project in exchange for bonds. [2] This process is called securitization.

APO1

In October 2003, APO participated in the secondary offering of MRT bonds where APO received $3 million, $4 million, and $5.253 million from the sale of series 1 MRT bonds on Nov. 2003, Feb. 2004, and May 2004 respectively. In October 2004, APO sold an additional series 2A MRT bonds for $4.091 million. APO2

The transaction illustrated above will not entitle APO to receive future cash flows from the current MRT project but APO still has the right to receive cash flows should MRT expand its operations. [3] In 2009, MPI exploited this loophole and entered into a cooperation agreement with APO where MPI made P89 million deposit. The cooperation agreement will assign the rights and interest of APO to MPI but it does not mean the sale of APO’s interest in MRTHI. The interests assigned to MPI will not generate cash flows unless the MRT project will be expanded.

In December 2012, the Government through the Department of Transportation and Communications (DOTC) announced their intention to gain full control of the MRT for $1 B. Majority of the $1 B will be used to retire the MRT bonds. Currently, Development Bank of the Philippines (DBP) owns MRT bonds with a face value of $676.25 million [4] and Land Bank of the Philippines (LBP) owns $7.649 face value. [5]

MRT project is a build-operate-transfer agreement with the Government for 25 years since 1997 with the investors guaranteed with 15% return on investments (ROI).

APO3

Should the DOTC buyout the private investors and retire the MRT Bonds, the DOTC will no longer be liable to any party. However, is the $1 Billion enough to buyout the investors?

APO4

To buyout LBP and DBP alone, the Government needs $1.2 billion. According to Section 7 of RA 6957 [6], the Government is required to compensate the investors all the expenses incurred in the project plus a reasonable rate of return but not exceeding the agreed ROI.

Unless the Government will revise their budget for their buyout plan, APO may only have marginal gains in the buyout and MPI may be in a very unfavorable position.

Sources:

  1. APO Letter to stockholders, http://www.anglophil.com/letter_to.html
  2. APO Sec 17A 2005, Note 6
  3. MPI Annual Report 2011, Message from the Chairman, p. 12, http://www.mpic.com.ph/uploads/2010/others/annual_report_12.pdf
  4. DBP 2010 Notes to Financial Statements, Note 5, p. 16, https://www.landbank.com/assets/downloads/LBP_AR09/NOTES%20TO%20Financial%20Statements.pdf
  5. LBP Notes to Financial Statements, Note 12, p. 15, https://www.landbank.com/assets/downloads/LBP_AR09/NOTES%20TO%20Financial%20Statements.pdf
  6. Build Operate Transfer Law, http://www.gppb.gov.ph/laws_rules/laws/RA_6957.pdf

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.

Philippine Tourism, Stock Thoughts: MPI, SCC, TA

Philippine Tourism

Growing tourism industry:

http://business.inquirer.net/107517/2012-growth-in-domestic-tourism-exceeds-2016-target

Nice.:)

 

MPI

MPI should liquidate more of its assets to raise cash and one of it is this:

http://business.inquirer.net/107565/marubeni-buys-into-maynilad

More coming perhaps?

 

SCC

Bad news for SCC:

http://www.rappler.com/nation/21780-4-killed-13-trapped-in-semirara-landslide

Temporary disruption in SCC’s operations would bear no long-term damage to a company that has a 90% market share in the Philippine’s coal industry.

 

TA

In my opinion, the Market failed to value TA properly. The market thought that TA’s value is only its power plant. I believe it’s more than that. TA has high probability of declaring property dividend that can be roughly valued at .47 per share. I do not think the market can hold TA’s price down if TA’s value will be unlocked to its shareholders through property dividends.

More here:

https://fundamentalenthusiast.wordpress.com/2013/02/14/speculating-on-trans-asia-property-dividend/

 

 

No post tomorrow.

 

Happy Valentine’s Day! 🙂

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.