Emotionless or Just Rational? Stock updates: LPZ, GREEN, APX

Check out how Roger Federer plays tennis:

http://www.youtube.com/watch?v=xNPaZj4yn00

He is considered the best tennis player of all time. Notice how calm his face was during the game? How do you describe him? Emotionless or rational?

I tried imitating Federer’s “emotionless” state in playing tennis but I always fail to do it. My emotions burst out of me every time I made an erroneous stroke or get frustrated on my serve. But in one practice game, I realized that by just focusing on the proper form I can manage to have the state that I am after. Emotions are signals that the body sent to the brain to signify something and therefore should not be suppressed but rather understood. I am not being emotionless in the game, I am being rational.

In investing, stock market gyrations do not affect me because the prices of my stocks will not affect the business of the company I own. If CHIB’s stock price decline by 20%, it does not mean that CHIB will stop doing business. Emotionless? Just rational.

I understand that others view the stock prices as signals. If CHIB declined 20% then there should be something bad. In order for you not to panic in times like that, you should do your own tons of due diligence.

 

LPZ

Finally! We can now be certain that GLO’s tender offer will be successful!

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8848_GLO.pdf

The successful tender offer is only the first step of our speculation in LPZ. After GLO’s successfully purchase BTI’s debts we can sit back, relax, and wait for GLO’s future move.

So what if GLO buy LPZ’s BTI?

Then LPZ’s balance sheet will then be free of P8 billion debt or an increase in book value of P1.85 and earnings will increase by P.04.

More here.

APX

APX shows off their disaster preparedness:

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8844_APX.pdf

It means that APX’s operation and assets are well protected from natural calamities. Good news! But I want the resource estimates. lol

 

GREEN

THEY HAVE A NEW CORPORATE WEBSITE!

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8853_GREEN.pdf

And it does not mean anything for us speculators. lol

Wohoo! December 11 is next weeeeeeeek!!! 🙂

Selected Stock Updates: CEB, FGEN, and LPZ

CEB

CEB reached its conservative valuation of 63.

My projection for CEB’s 2012 earnings is at 6.27 which translates to 62.70 should it be valued at 10x PE ratio. PAL is the only comparable publicly listed airline company in PSE so we could not determine on what multiple should CEB trade. Conservative investors may stick to 10x PE ratio while risk takers can gamble for a 15x PE ratio.

FGEN

I like FGEN. This is a stock that I consider to be the most conservative. Conservative because buying this stock is like seeing the future. Earnings are very predictable and immune to economic recession. A stock I can comfortably buy even at 23.50.:)

I failed to add this in my own portfolio though. The reason is that I was in CHIB when FGEN’s major business developments happened. Although FGEN’s earnings are predictable, CHIB’s short term capital gains are much more predictable (at that time).

On hindsight I should have bought FGEN!lol

Read about FGEN here.

LPZ

A stock I bought for speculation.:)

Recent hint on what GLO would do is disclosed here:

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8566_GLO.pdf

Part of the news that alarmed me was the portion where the debt is convertible to equity! If that would be true then LPZ valuation will fall at the lowest end of our valuation model (6.51).

Of course, I’ve done my due diligence and the financial obligations that GLO are buying are NOT* convertible to equity!

*I hope I did not miss such an important fact!

Everything A Beginner Stock Investor Needs To Know!

There is so much you need to learn in stock investing and the first question that would come to your mind would probably be: WHERE DO I BEGIN?

Luckily, there are plenty of helpful website available in the net.

For beginners, please visit this website:

http://www.pseacademy.com.ph/LM/p0/investors~reading/l-beg/k-all/Beginner.html
And shoot all your questions in this blog or in “Newbie Corner by michelli.”

Happy investing!:)

Abra Mining and Industrial Corp. (PSE: AR)

Business Profile

Abra Mining and Industrial Corporation (AMIC) was incorporated and registered in the Philippines with the Securities and Exchange Commission (SEC) on September 28, 1964. AMIC listed its shares of stock in the Philippine Stock Exchange (PSE) on December 24, 1969.

AMIC is licensed to engage in the exploration, development, exploitation, process, manufacture, extract, mill and sale of cement and metal concentrate, marble, building materials and other minerals such as copper, gold, silver, iron, lead, etc. processing and manufacture of non-metals for industrial and commercial purposes at wholesale only.

The Company has the following mining claims: [1]

The Company is not yet in commercial operations but had expressed their five-tiered long-term management program. The five tiers are as follows:[2]

1.   Baticang Magnetite and Gold project (Alluvial Plant) – the company considers the project as promising. They believe that the project is positioned to take advantage to the rising demand of iron and gold. The magnetite or iron sands project is acknowledged by the company as good long term business as steel is the basic requisite and foundation for growth of any developing nation. The Alluvial plant has an installed capacity of 50-60 MTPD (Metric Ton Per Day). Currently the operation is occupied by research work on recovering the very fine gold traces and other precious metal in order to optimize the revenue to be generated in the project. Trial shipments were also being mulled as the magnetite inventory piles up to the marketable and shipping volumes.

2.   Capcapo Gold Field – The Capcapo Gold Property is strategically located in Abra Province, Northern Luzon, Philippines, north of the prolific Baguio-Mankayan Gold District that has combined production, current reserves and resources in excess of 60 million ounces of gold. [3]

On the last quarter of 2011, Olympus Pacific Minerals, Inc. has signed a joint venture agreement with the Company. The terms of the joint venture are as follows:

a.   Payment to Abra Mining of $300,000 upon signing of the joint venture agreement and additional payment of $400,000 upon gaining “unencumbered access” to the property.
b.   Payment of $2,000,000 and 2 million common shares of Olympus Pacific Minerals, Inc. or common shares with total value of $5 million whichever is of lesser value each time a specific level of mineral reserves was defined or daily production rates were achieved.

3.   Setting up of kiln for the Baticang-Bucay Lime Plant – the lime kiln construction blueprint has been ready for implementation immediately when project funding is readily available. The project is very relevant to the mining and agricultural industry which can be commissioned immediately by the company with the least capital outlay and can generate high revenues. This lime project will become an integral part of the Patok reopening in that it will supply the lime requirements of the Patok plant. The lime project will serve the demand in Northern Luzon being the only producer should it commence commercial operations.

4.   Reopening of Patok Gold Project – the Patok Gold Project which was operating in the 1970’s to early 1980’s was shut down during the oil crisis.    The Company claims that the reopening will be relatively easier and can be fast tracked since the assets related to the operations are still intact and operating, provided that the required fund is readily available. Other advantages enjoyed by the Patok project were the high grade ore body that was already blocked and accessible upon rehabilitation and the qualification of the mine site under the government revival program for “Certificate of Non-Coverage” where old mines may restart operations while their Environmental Compliance Certificate (ECC) documentation is in process with the DENR.

The rehabilitation of the Patok project is hampered due to the unusually high incidence of major landslides in the area obstructing the delivery of supplies and the poor security situations in the area due to political rivalry.

5.   Expansion and refinement of the Alluvial plant – The paramount objective of the expansion is to produce a consistent shippable volume monthly. The projected expansion will employ electrically powered dredging equipment to lower the cost of mining due to unfettered fuel increases.  This reduces costly utilization of heavy equipment that is presently being employed in our operation and  to  further  enhance  processing  tonnage  of  precious  metals.

Sources:
1.   Abra SEC 17-A 2010 filings; http://www2.pse.com.ph/html/ListedCompanies/pdf/2011/AR_17A_Dec2010.pdf
2.   Definitive Information Statement for Annual Meeting of Stockholders on October 28, 2011; http://www2.pse.com.ph/html/ListedCompanies/pdf/2011/AR_D20IS_10072011.pdf
3.   Olympus SEC filings Form 6-K September 30, 2011; http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001199073-11-000943%2Etxt&FilePath=%5C2011%5C09%5C30%5C&CoName=OLYMPUS+PACIFIC+MINERALS+INC&FormType=6-K&RcvdDate=9%2F30%2F2011&pdf=

Introduction to stock market investing

Hello reader! You probably have an idea how profitable it is to invest in the stock market but investing in stocks is not an activity where you could be a millionaire overnight.

Some common misconception in stock investing are:

  1. The time horizon in stock investing.
  2. Stock market is unpredictable! I could lose all my money!
  3. You need to be rich, super intelligent and spend a lot of time in stock investing.

Time horizon in stock investing

One critical mistake that most people do is treating the stock market as a slot machine or any form of gambling; they invest in the hopes of doubling their money in a short time such as 6 months or even 2 weeks after they invested. Although some would claim making money using this method (and we here respect that) conservative individual investors should not invest their money which they would need in the next three years.

The stock market may fall more than 40% from their current value. Just this 2008, JFC fell from P50 on September 2008 to as low as P35 by the end of November, a decline of 30%. Should you panicked and sold your shares at a loss you could have missed it bouncing up to P70 by June 2010 making a substantial gain of 40% should you purchased it P50 per share.

Stock market is unpredictable! I could lose all my money!

Yes stock market is unpredictable and I believe that no one can predict where the market would be going in the next few days. But hey! We are not to predict the whole stock market! We are only to worry about the stocks we invested in. With the basic fundamentals (to be discussed on a later date) your investment should be doing good and the risk involved would only be minimal.

You need to be rich, super intelligent and spend a lot of time in stock investing.

How well you invest in stocks will depend on many factors and none of them depends on whether you are rich, super intelligent, or with fancy software. It depends solely on what you already know. If you love fast food and your nephew Juanny craves for Jollibee; who could be in a better position to predict the rapid growth of Jollibee foods corporation (JFC) but you. You love the chocolate coated Pretzels, the healthy snack Nova, and the refreshing taste of C2; who would be in a better position to analyze (URC) but you. You could have reaped substantial gains should you acknowledged that you experience their products first hand. JFC more than quadrupled its value from P20 on April of 2004 to its current price as of this writing of P88 and URC more than quintuple its value from 8 pesos on January 2009 to about P47 as of this writing.

Happy investing!

Knowing Yourself

In stock investing knowing your risk tolerance is very much helpful.

You may answer the following questions:

1.   Which of these three cars would you prefer to drive?
a.   Ferrari
b.   Jeep
c.   Volvo

2.   You would rather eat?
a.   At a new, exotic locale you’ve never been to
b.   At your favorite restaurant
c.   Leftovers at home

3.   You meet someone at the party who you’ve ehard is a successful broker. He gives you a stock tip. Do you…
a.   Call your broker immediately and buy shares?
b.   Ask other people their opinion of this broker and this stock?
c.   Ignore it

4.   If speed limit is 65 do you….
a.   Drive at 75?
b.   Drive between 65 and 74?
c.   Drive below 65

5.   Your cat gets stuck up a tree. Do you…
a.   Climb the tree yourself?
b.   Climb a ladder and carry her down?
c.   Call somebody else?

6.   You are given Php 500,000 from your rich uncle for your birthday. Do you….
a.   Spend it all?
b.   Invest it?
c.   Keep it in a lockbox?

Case Study – PRC

Let’s improve our learning experience in this thread by taking real life examples.

Case Study – PRC

PHES’s stock price had been soaring in these past few months due to the possible joint venture with Ayala. Ayala is said to invest in PHES’s 60 hectare plastic city estate in Valenzuela City. A company that has a similar story would be PRC.

Philippine Racing Club, Inc. (the Company, PRC), operates a horse racing franchise.  Under the franchise, PRC may take or arrange bets for races conducted in or outside the Philippines.  Currently, the betting operation of the Company is being expanded by the addition of more Off-Track Betting stations (OTBs). The Company’s source of revenue is the 8.5% share in the gross receipts of the betting tickets.

PRC was the largest racing club in the Philippines when it was organized in 1937. The whole racetrack property was located in a 21.6 ha. land in Makati City. On December 21, 2008, the last official horseracing was conducted and starting January 6, 2009, horseracing was conducted in the new racetrack complex in Naic, Cavite.

On February 25, 2011, the Company disclosed that they executed a master development agreement (MDA) with ALI where the company will contribute its 21 ha land in Makati for a mixed-use real estate development. The agreement provides that PRC will have 18% share of the saleable units.

In October 2011, ALI purchased 2.96 ha. of land within the Makati property in compliance with the terms and conditions of the MDA. The selling price of the land sold was not disclosed but on its SEC 17-A filings in 2011, ALI advanced P554.5 million to PRC representing 24% of the agreed price or an implied selling price of P2.3 billion. Currently, no revenue regarding the transaction was recognized by the Company but the cash proceeds given by ALI are lodged as “advances from customer.”

The accounting treatment of the sale of land by PRC might serve as a market surprise as soon as PRC recognizes the transaction as revenue. The effect of the revenue recognition will be a sudden increase in the top line of P 2.3 billion. The cost of the whole 21 ha land was recorded at only P81 million. Assuming that the cost of the 2.96 ha land including cost to prepare it for sale is 50 million, possible increase in the profit of PRC will be 2.25 billion.

Management motivation might be present to recognize the revenues in 2012 as their by-laws stipulate that management bonus shall be 10% of annual income before tax. Also worth noting are the buy-back transactions made by the company since the approval by the Board of the buy-back program on April 17, 2012. The total shares bought back by the company are 5,070,500 shares at 9.50.

The downsides are:
1.   The gain to be recognized is one time only.
2.   There is a probability that the 2.3 billion revenue will not be recognized in 2012.

Let’s wait and see how the market will react as soon as the company presents the information above in their financial statements.

Disclosure: No position in any stock mentioned.