Making Sense of Ginebra San Miguel vs Ginebra Kapitan

In an article in found here, Court of Appeals has ordered Tanduay Distillers (TDY) to stop production and remove from the market gin products bearing the name “Ginebra” and pay San Miguel Corporation (SMC) 50% of total gross sales and other charges. This is in reference to TDY’s product named Ginebra Kapitan that is closely named to SMC’s Ginebra San Miguel. Ginebra San Miguel has been in the market since 1945 while Ginebra Kapitan has only been around mid-2003. TDY’s argument is that the word “Ginebra” (which means gin in Spanish) is a generic name and should not be of exclusive use by SMC.

The legal battle between SMC and TDY regarding Ginebra Kapitan and Ginebra San Miguel dates way back August 2003. On September 2003, Mandaluyong Regional Trial Court issued a temporary restraining order (TRO) preventing TDY from manufacturing Ginebra Kapitan. On January 9, 2004, Court of Appeals decided on a preliminary injunction against TDY finally preventing them from producing Ginebra Kaptan. On August 2009, the Supreme Court (SC) reversed the decision of the Court of Appeals and lifted the preliminary injunction effectively allowing TDY to produce Ginebra Kapitan.

Scrutinizing the legal battle above, TDY appears to generate revenues in the Ginebra Kapitan only from 2009 to 2013. There was no public information available for the revenues generated by TDY on their Ginebra Kapitan making it impossible to determine the exact amount of the penalty which is stated as 50% of gross revenue generated by the sale of Ginebra Kapitan products. In the SEC filings of TDY in 2011, TDY disclosed that the litigation is a 100 million civil case. [1] In the SEC filings of Ginebra San Miguel, Inc. (GSMI), we can estimate the revenue of Ginebra Kapitan using the following calculations: [2]


At 5% market share, TDY may have generated 599 million annually in the sale of Ginebra Kapitan. Assuming that TDY generated 500 million of gross revenues from 2009-2012, TDY has a total financial liability of 750 million (500 million x 3 years x 50% of gross revenue).

However, read the article again and you will notice that the CEO of TDY, Michael Tan, will appeal the decision and knowing the Philippine justice system, this may take a long-long-long time.


  1. TDY SEC 17-A 2011, Legal Proceedings, p. 17,
  2. GSMI SEC 17-A 2012, Products, p. 6,

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.


Profiling: San Miguel Corporation (PSE: SMC)

San Miguel Corporation (SMC, the Company) has the following corporate structure:


SMC is engaged in the following industries:

  1. Beverages through San Miguel Brewery Inc. (SMB), Ginebra San Miguel, Inc. (GSMI), and San Miguel Foods and Beverage International Limited (SMFBIL)
  2. Food through San Miguel Pure Foods Company, Inc. (SMPFC) (owns Golden Bay Grain terminal)
  3. Packaging through San Miguel Yamamura Packaging Corporation (SMYPC), San Miguel Yamamura Packaging International Limited (SMYPIL), Mindanao Corrugated Fibreboard, Inc. (MCF), San Miguel Yamamura Asia Corporation (SMYAC)
  4. Real Estate through San Miguel Properties, Inc. (SMPI)
  5. Power Generation and Distribution through SMC Global Power Holdings Corporation (SMC Global)
  6. Mining through Clariden Holdings, Inc, (Clariden)
  7. Fuel and Oil through SEA Refinery Corporation (SRC)
  8. Infrastructure though San Miguel Holdings Corp. (SMHC)
  9. Telecommunications through Vega Telecom, Inc. (Vega) and Eastern Telecommunications Philippines (ETPI)

Major contributor to SMC’s income is the Beverage, Food, Packaging, Power Generation and Distribution, and Fuel and oil businesses.

SMC’s beverage business is mainly driven by San Miguel Brewery Inc. (SMB). SMB claims to have a market share of more than 90% in the Philippines and exports its beer products to over 40 countries. SMB’s domestic operations only grew by 5% in 2012 while international operations only rose 6%. SMB launched in December 2012 a new product to cater the health conscious market segment with zero-carb, low calorie San Mig Zero.

Ginebra San Miguel, Inc. (GSMI) has trimmed down its losses down to P566 million in 2012 from P900 million and San Miguel Foods and Beverage International Limited (SMFBIL)’s subsidiary, PT San Miguel Indonesia Foods and Beverages, sold its land use rights, building and machinery for $27 million on September 28, 2012 recognizing a gain of P45 million.

SMC’s food business is under San Miguel Pure Foods Company, Inc. (SMPFC) with recognizable brands such as Magnolia, Purefoods, Tender Juicy, Monterey, Star, Dari Crème, B-Meg, San Mig Cofee and JellYace.

Below are SMPFC’s corporate structure:


San Miguel Foods, Inc. operates the Feeds, Poultry and Fresh Meats, Franchising (Smokey’s hotdog and Hungry Juan roast barbeque outlets), food services business through Great Food Solutions.

San Miguel Mills, Inc. (SMMI) engages in the manufacture and distribution of flour and premixes. In September 2011, SMMI formed Golden Bay Grain Terminal Corporation (GBGTC) for the construction of a grain terminal in Mabini, Batangas where SMMI plans to invest P2.5 billion with the intention to minimize freight costs for the flour and feeds milling operations.[1] Total costs incurred as of December 31, 2012 for the grain terminal is 1,071.2 million.[2] GBGTC is not yet in commercial operations.

The Purefoods-Hormel Company, Inc., a 60-40 joint venture between the Company and Hormel Netherlands B.V., produces refrigerated processed meats (i.e. hotdogs, bacon, ham, and nuggets) and canned meat products (i.e. corned beef, luncheon meat, sausages, spreads and ready-to-eat viands.) Magnolia, Inc. a wholly owned subsidiary, manufactures and market butter, margarine,  cheese, jelly snacks, and ice cream. PT San Miguel Pure Foods Indonesia, a 75% owned subsidiary engaged in the manufacture and distribution of processed meats in Indonesia. San Miguel Super Coffeemix Co., Inc., a 70-30 joint venture between the Company and Super Coffee Corporation Pte Ltd. (SCCPL) (30% interest was initially owned by Super Cofgeemix Manufacturing Ltd. of Singapore), started commercial operations in April 2005 by marketing its 3-in-1 coffee mixes in the Philippines. San Miguel Pure Foods International, Limited, a wholly owned subsidiary, has a 51% effective interest in San Miguel Hormel Co., Ltd. which is engaged in live hog farming and production of feeds and fresh processed meats in Vietnam.

SMC’s packaging business supplies the internal requirements of the Company and major Philippine-based multinational corporations such as Nestle Philippines, Inc., Unilever Philippines Inc., Kraft Foods Phils., Diageo Philippines, Inc., Del Monte Philippines, Inc. Coca-Cola Bottlers Philippines Inc., and Pepsi-Cola Products Philippines, Inc. SMC’s packaging group has Glass, Metal, Plastic, Polyethylene terephthalate (PET), Paper, and Composites.

SMC’s participation in the Power industry is through SMC Global Power Holdings Corp. (SMC Global). Currently, SMC Global derives its revenue from the sale of electricity under the Independent Power Producer Administrator (IPPA) contract with Independent Power Producers (IPP). IPPAs are responsible for the procurement of power plant’s fuel requirements and management of the contracted energy output of the facilities, including the sale of power and offering of ancillary services [3] while IPPs are private companies that owns and operates the power plants. [4] SMC Global is the IPPA for the Coal-fired Sual, natural gas-fired Ilijan and hydro-electric San Roque power plants which have combined contracted capacity of 2,545 MW.

In 2010, through a subsidiary, San Miguel Energy Corporation, SMC Global purchased 100% interest of Daguma Agro-Minerals, Inc. (DAMI), Bonanza Energy Resources, Inc. (BERI) and Sultan Energy Phils. Corp. (SEPC) for $ 25 million. [5] DAMI, BERI, and SEPC are in the exploratory stages of their mining activities. Delays of the production timetable were caused by the newly enacted Environment Code of South Cotabato that bans open pit mining. [6]

SMC operates its fuel and oil business through a wholly owned subsidiary Sea Refinery Corporation (SRC). SMC has 68.26% in a publicly listed oil refinery company, Petron Corporation (PSE: PCOR) with SRC owning 50.10% and SMC directly controlling 18.16%. PCOR dominates the petroleum industry and Liquefied Petroleum Gas (LPG) industry with 38.5% and 41.7% market share respectively. [7]

In 2011, a $2 billion refinery upgrade dubbed as Phase 2 of Refinery Master Plan (RMP-2) was launched that will enable PCOR to fully convert residual products to higher-value gasoline, LPG, diesel and propylene. PCOR is also constructing a $500 million co-generation power plant adjacent to the refinery plant in Limay, Bataan which can generate considerable cost savings in power consumptions and thus lower refinery costs. The first phase of the co-generation plant will be completed by the second half of 2013 while RMP-2 is expected to be completed in 2014.

Other significant investments:

In 2010, SMC subscribed to 10.1% interest in Inodphil Resouces NL (Indophil). As of December 31, 2012, SMC’s interest was diluted to 3.99% as a result to additional share issuances made by Indophil. Indophil has 37.5% beneficial ownership in Sagittarius Mines, Inc. which in turn holds a 40% controlling equity stake in the Tampakan Copper-Gold Project in Southern Mindanao.

SMC’s infrastructure business, San Miguel Holdings Corp. (SMHC), is engaged in the construction of Tarlac-Pangasinan-La Union Expressway (TPLEX), Metro Rail Transit Line 7 (MRT 7), NAIA Expressway, and Boracay Airport. The 46-kilometer first phase of TPLEX is expected to be operational in the third quarter of 2013 and the remainder 88-kilometer is expected to be completed by late 2014. Construction of 44-kilometer MRT 7 has not yet started. In May 6, 2013, SMC was awarded with P15.52 billion NAIA Expressway Project. [8] Construction of the project is expected to commence in January 2014. [9] SMC hopes to commence construction of the Boracay Airport by the first quarter of 2014 and to complete the project by 2015.

San Miguel Properties, Inc. (SMPI) hast the following projects:



  1. PureFoods investing P2.5B in grains terminal in Batangas,
  2. PF SEC 17-A 2012, Investments in Subsidiaries, p. 67,
  3. PSALM preparing to bid out 5 power contracts,
  4. RA 9136, Definition of Terms,
  5. San Miguel to expand Davao coal project,
  6. SMC SEC A17-A 2012, Investments in Subsidiaries, Note 6, p. 164,
  7. Oil Supply/Demand Report FY 2012,
  8. NAIA Expressway project,
  9. San Miguel to start building NAIA Expressway in January,

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.

Gold Plunges, Stock thoughts: CPG, SMC, MPI

Gold Plunges

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

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 declared cash div:

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

My opinion only.


Yesterday I asked how SMC will fund their projects, I guess it would be through this $2 B note:$2-B-debt-notes&id=68715


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

They claimed it was 7.5x oversubscribed.

Extension Requests, Stock thoughts: TA, AP, SMC

Extension Requests

It is weird to see a lot of companies requesting for the extension to file their SEC 17-A form (2012 financial statements).

Just saying. 🙂



I hope this disclosure would be enough to erase your doubts regarding BHP’s intention to drill on August 2013:

SLTEC construction will start in the 2nd half of this year:

Good thing TA has a lot of cash:

I will post the nature of Service Contracts (SC) and Mineral Production Sharing Agreements (MPSA) soon.

Last year TA declared share rights offering (SRO) in August, my wish is that they will do the same in August but match it with property dividend declaration so that they can peg the SRO at higher price.

Just a wish.



AP’s power barge charges at lower rate:

With lower oil, AP has lower cost of producing electricity which also means lower power rates for Mindanao. Not a bad news, a win-win for both parties. 🙂



SMC bag NAIA express way project:

Actually, I am worried on how SMC can finance this project. More debt and equity issuance perhaps?

Will look more on SMC.

Petron Corporation (PSE: PCOR)

Figures in BOLD are author’s estimate.

Business Profile
Petron Corporation (the Company), the Philippines largest oil refinery enjoys a market share of 38% as of 2011. The Company was incorporated in the Philippines in 1966 as Esso Philippines, Inc and was renamed Petrophil Corporation in 1973 when the Philippine National Oil Company (PNOC) acquired Esso. In 1985, Petrophil Corporation and Bataan Refinery Corporation (formerly the Standard Vacuum Refining Corporation) were merged with Petrophil as the surviving Corporation. Petrophil later changed its corporate name to Petron Corporation.

In July 2008, a company owned by Ashmore Group, SEA Refinery Holdings B.V. (SEA BV), acquired 40% interest in Petron. In December 2008, SEA Refinery Corporation (SRC), a domestic corporation owned by SEA BV, acquired the 40% interest of PNOC in Petron. In a related development, SEA BV sold 10.1% of the issued shares to SRC. As of December 31, 2008, the capital structure of Petron was as follows: SRC – 50.10%; SEA BV – 40.47%; and the general public – 9.43%.

On December 24, 2008, San Miguel Corporation (SMC) and SEA BV entered into an Option Agreement granting SMC the option to buy the entire ownership interest of SEA BV in its local subsidiary SRC. The option may be exercised by SMC within a period of two years from December 24, 2008.

SMC exercised its option to acquire 40% of SRC on June 15, 2010. SMC exercised its option to acquire the remaining 60% of SRC’s shares, in December 2010. With the exercise of the option, SMC beneficially owns approximately 68% of the outstanding and issued shares of stock of Petron.

At present, the Company has the following subsidiaries and affiliates and its percentage of ownership:

New Ventures Realty Corporation (NVRC)
A realty firm established on August 24, 1995 and 60% owned by Petron Retirement Fund (PRF). NVRC is authorized to acquire and develop land but does not engage in subdivision business. Land suitable for use as service station sites, bulk plants or sales office is purchase by NVRC which are then leased to Petron.

Petrogen Isurance Corporation (Petrogen)
Serves the insurance requirements of Petron and its allied business Partners such as contractors, suppliers, and dealers.

Overseas Insurance Corporation, Ltd. (Ovincor)
Ovincor was incorporated under the laws of Bermuda on November 16, 1995 for the purpose of expediting the reinsurance of Petron’s insurable interests as covered by Petrogen.

Petron Freeport Corporation (PFC)
PFC is engaged in the business of importing, transporting, trading, and retailing petroleum products and related products. As a registered Subic Bay Freeport (SBF) Enterprise, PFC is entitled to tax-free and duty-free importation of raw materials and capital equipment for use solely within SBF. PFC has retail division which handles the service station operation and manufacturing division which is engaged in refining, distilling, and manufacturing petroleum products, oil, gas and other vehicle substance.

Petron Marketing Corporation (PMC)
PMC operated sixteen (16) outlets at various locations. PMC also operated twenty three (23) quick service restaurants (QSRs) which are located in various service stations. PMC aims to convert company-owned company-operated (COCO) to company-owned dealer-operated (CODO). With this new direction, PMC will concentrate in the Franchising Business and support Petron Reseller’s network expansion program through providing manpower for the start up operations and assistance in the operations of stations with newly-appointed dealers.

Petron Singapore Trading Pte. Ltd. (PSTPL)
The subsidiary aims to optimize crude procurement and participate in Singapore’s Global Trader Program (GTP), which allows the Company access to a wider selection of crude alternatives, resulting in further optimization of Petron’s crude selection.

Petrochemical Asia (HK) Limited (PAHL)
In July 2010, the Company acquired 40% stake in PAHL with an option to raise interest to 51%. PAHL is the parent firm of the Philippine Polypropylene Inc. (PPI) which operated a polypropylene plant in Mariveles, Bataan. Propylene raw materials which is needed to produce polypropylene will be sourced from Petron’s refinery which can produce 140,000 MT of propylene yearly.[1]
Polypropylene is a raw material for making plastic. Polypropylene is resistant to heat and fatigue and is used for piping, flip-top bottles, plastic items for medical or laboratory use, clear bags, plastic ropes and packaging.[2]

Limayan Energen Corp. (LEC)
On August 3, 2010, the Company together with Two San Isidro SIAI Assets, Inc (Two San Isidro) incorporated LEC. LEC was formed to build, operate and maintain a cogeneration power plant as the Bataan refinery. The first phase will be online by early 2013 followed by the 2nd phase at the end of the same year. The cogeneration plant has four Circulating Fluidized Bed boilers that can generate a nominal capacity of 216 MW.[3] The power plant will be fuelled by petroleum coke or petcoke, an oil refinery by-product which will be sourced from the Bataan Refinery.[4]

Manila North Harbour Port, Inc.
On February 2, 2011, the Company acquired 35% equity in Manila North Harbour Port, Inc., which holds a 25-year concession from the Philippine Ports Authority to operate the Manila North Harbor. [5] Moving Petron’s depot facilities to North Harbor from the Pandacan Terminal would reduce the Company’s handling costs by as much as 80%. North Harbor has deep-water facilities which tankers can use directly which will allow bulk transportation of oil.[6]

Petron’s attraction is the Company’s expenditures towards efficiency, cost savings, and developments to increase revenues.

The year 2013 and 2014 are years where the Company will enjoy a substantial growth in revenues as the 216 MW cogeneration power plant will go online by 2013 and the Refinery Expansion Project (RMP-2) will be in commercial operation by 2nd quarter of 2014 which will enable the Company to process a wider range of crude oil types. The 216 MW petroleum coke fired power plant will be able to generate the needed steam and power for the Bataan Refinery and sell the excess to the Wholesale Electricity Spot Market (WESM).


The author does not own any of the stock mentioned at the time of this writing.