Stock thoughts: VMC, APC, TA

VMC

Prepays debt:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3262_VMC.pdf

More on VMC:

https://fundamentalenthusiast.wordpress.com/2013/01/17/victorias-milling-company-inc-pse-vmc/

 

APC

Sy group to consolidate power assets to APC:

http://www.philstar.com/business/2013/04/22/933301/sy-group-consolidate-energy-units-one-firm

But the Company (as usual) claim to have no knowledge about it:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3268_APC.pdf

To those who are interested in the company:

https://fundamentalenthusiast.wordpress.com/2013/04/22/profiling-apc-group-inc-pse-apc/

 

TA

Phinma President and Vice-Chairman prepares for the property dividend of petroleum subsidiary:

http://www.philstar.com/business/2013/04/22/933311/ta-oil-finalizes-pepc-listing

The catch is its only for SC 55.

My complete rationale of buying TA:

https://fundamentalenthusiast.wordpress.com/2013/04/22/trans-asia-purchase-rationale/

Advertisements

Trans-Asia Purchase Rationale

The thesis of buying TA was mainly the likelihood of TA’s petroleum subsidiary to be distributed as Property Dividend and with the recent statements of Phinma President and vice-chairman Ramon R. del Rosario,[1] that likelihood becomes highly probable. The first question that will come in mind is how much is Palawan 55 Exploration & Production Corp. (PEPC) worth?

The comparable company to PEPC is Philex Petroleum (PXP). That said, we go in detail what are the assets that underlie the mentioned companies.

PXP

TAR1

PEPC

TAR2

The most notable advantage of PXP over PEPC is its ownership of 36% in SC 72. However, PXP has no financial capacity to initiate the drilling of the service contract alone thus the 36% interest in SC 72 is actually misleading since this interest will eventually be diluted if a new partner with the financial capacity to perform the drilling of the well will buy-in to the service contract. In the case of PEPC, the partner with the financial capacity is BHP Billiton.

Another disadvantage of PXP’s assets is of course the encumbrance that SC 72 is a disputed area with China.

Despite all that is mentioned about PXP, the market still valued the company at P50 billion. That said, it is then safe to assume to have the following valuation model:

TAR3

Historically TA declares share right offerings (SRO), assuming that TA will continue the trend, we can conservatively assume that the SRO will dilute TA shares by 50%:

TAR4

Should the property dividend push through, a shareholder of TA may receive a property dividend which has a value of 0.82, 5.15, and 10.29. In the case of 50% dilution of TA shares, a TA shareholder may receive a property dividend with a value of 0.55, 3.43, and 6.86.

One may argue that it depends on the number of PEPC shares that will be available for property dividend, however, that fact is irrelevant. To illustrate my point:

TAR5

Based on the illustration above, as long as the assumed value of PEPC remains constants, the value of PEPC for each TA shareholder remains the same regardless of the number of PEPC shares distributed.

At current TA price of P2.55~P2.60 the stock is still undervalued considering that at this price, the value of the property dividends may surpass TA’s current market price.

Weaknesses:

  1. Non-occurrence of PEPC property dividend
  2. Relative valuation may not be realized by the market.

Sources:

  1. Clarification of news article: “TA Oil finalizes PEPC listing”, http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3284_TA.pdf
  2. Forum Energy Plc Annual Report 2011, p. 3, http://www.forumenergyplc.com/DocumentLibrary/FOR-16846-AR11-web.pdf
  3. Otto Energy Annual Report 2012, p. 10-12, http://www.ottoenergy.com/irm/content/annualreport/AR2012.pdf

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

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. 🙂

 

TA

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

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-3003_TA.pdf

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

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2978_TA.pdf

Good thing TA has a lot of cash:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2987_TA.pdf

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

AP’s power barge charges at lower rate:

http://www.interaksyon.com/business/59423/aboitiz-power-barge-unit-trims-rates-to-2-year-low

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

SMC bag NAIA express way project:

http://www.interaksyon.com/business/59473/san-miguel-bags-naia-expressway-project

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

Will look more on SMC.

North vs South Korea, Stock Thoughts: VMC, TA

North vs South Korea

There has been a fear that stock market will crash if war in Korea will push through.

Probably…. But should that happen it would be an opportunity to buy companies that you are interested in.

Ask a simple question before buying a battered stock (should a war happen):

In what way can a war in Korea disrupt the business of the companies that you are invested in?

Example: MER. Will people stop using electricity if there is war in Korea?

 

I would appreciate if anyone can share their thoughts on how a war in Korea could affect businesses here in the Philippines because I can’t think of any. 🙂

 

VMC

And VMC went up today closing in to my valuation of 1.70.

I sold VMC shares at a loss for my hypothetical conservative portfolio for the reason that insiders will keep on selling shares causing VMC’s stock price to continually trade at undervalued levels.

https://fundamentalenthusiast.wordpress.com/2013/01/17/victorias-milling-company-inc-pse-vmc/

 

TA

DOE threatens to cancel BHP Billiton’s service contract should it not fulfill its obligation in August:

http://www.philstar.com/business/2013/04/04/926607/doe-threatens-cancel-bhp-billiton-led-service-contract

A clarification from TA that the consortium did not seek extension:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2704_TA.pdf

Recall that the delays of the drilling were caused by local permitting issues not BHP Billiton’s incapacity to fulfill its obligation.

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2328_TA.pdf

 

TA’s plans to drill 3 oil wells:

http://manilastandardtoday.com/2013/04/02/trans-asia-plans-to-drill-3-oil-wells/

My Trade in TA, Stock Thoughts: MMI, TA

My Trade in TA

I sold TA at 2.28 last March 19, just for the sake of trying a simple thesis:

No property dividends to be announced in March 21 ASM will cause panic to most traders.

I bought back TA shares today at 2.18 generating me 2% gain net of fees. It was exciting and I confirmed time and time again that trading is NOT compatible with my personality.

Special thanks to spyfrat, my sugar trader friend, and my friend who traded with me in TA. They helped me in determining the exits and entry points. 🙂

 

MMI

“Rumor” has it that MMI will serve as a backdoor vehicle of Lucio Co’s Union Energy:

http://www.philstar.com/business/2013/03/22/922474/lucio-co-firm-acquires-majority-stake-mariwasa

Take note that Union Energy will build a biomass plant in Nueva Ecija.

 

TA

See the CEO’s buying:

http://www.pse.com.ph/resource/corpt/2013/TA_23B_03222013.pdf

An insider selling his/her shares would mean a lot (i.e. he/she needs cash to pay off expenses, he/she is happy for the gains, or negative news about the stock)

An insider buying would basically mean that the stock is cheap.

None that was disclosed this week impaired TA’s valuation. My opinion only.

Stock Thoughts: SECB, TA, MMI

SECB

SECB following the footsteps of MBT:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2325_SECB.pdf

20% stock div. 🙂

 

TA

New disclosure on TA:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2328_TA.pdf

Possible delays on the drilling due to the regulatory issues.

A good article simplifying the disclosure:

http://www.interaksyon.com/business/57474/philippines-next-malampaya-stalls-on-delays-in-govt-permits

 

MMI

According to my memory, a privileged few have insider information on anything about Lucio Co. That said, rumors circulating about this stock should be true(?).

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2276_MMI.pdf

However, MMI is already standing at 6 billion market capitalization. It doesn’t make sense for lucio co to buy the company at that level.

Waiting for more disclosure. 🙂

Making Sense on PXP vs TA Petroleum

Philex Petroleum (PXP)

TA1

PXP has 2.27% interest in the largest operating oil field in the Philippines, Galoc oil field. The oil field produced 2.4 million barrels with an estimated 1.61 million barrels expected to be produced in 2012. [1] Proved and probable reserve remaining is estimated to be 4.4 million barrels. [2]

 

TA Petroleum (TAP)

TA2

Note: An Operator is the party that will take all the costs and risks in the drilling.

 

Sources:

  1. Forum Energy Plc Annual Report 2011, p. 3, http://www.forumenergyplc.com/DocumentLibrary/FOR-16846-AR11-web.pdf
  2. Otto Energy Annual Report 2012, p. 15, http://www.ottoenergy.com/irm/content/annualreport/AR2012.pdf
  3. Otto Energy Annual Report 2012, p. 10-12, http://www.ottoenergy.com/irm/content/annualreport/AR2012.pdf