Aboitiz Group and VITA, Stock Thoughts: MED

Aboitiz Group and VITA

Have you noticed how Pilmico was allotted a lot of cash?

Sale of Pilmico’s Citysavings interest:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2496_UBP.pdf

Pilmico has 40% interest in Citysavings bank therefore cash raised in this transaction is approximately P2.28 billion. Pilmico’s cost in the bank’s interest is only P544 million suggesting a onetime gain of P1.7 billion.

(source: AEV SEC form 17A 2011, p.31, http://www.pse.com.ph/resource/corpt/2012/AEV_17A_Dec2011.pdf)

 

AEV allots 1.3 billion for Pilmico:

http://www.bworldonline.com/content.php?section=Corporate&title=Conglomerate-eyes-threefold-spending-hike&id=67722

It has been rumoured that Pilmico will take position in VITA.

How much should be the buying price of VITA? I don’t know but for certain it’s not below P1.

More here:

https://fundamentalenthusiast.wordpress.com/2013/02/25/playing-with-vitas-par/

 

Downside of this speculation:

Although there is an obvious synergy between VITA and Pilmico should the buy-in occur, VITA has P2 billion debt for Pilmico to take over.

 

MED

I hate backdoor rumors, no amount of due diligence will allow an investor to take advantage of the price movement unless one has an insider information.

As usual, the company itself doesn’t know the reason of the price surge:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-2489_MED.pdf

These situations are worth watching in the sidelines for us to learn but not to monetize. lol

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Learning from Tycoons, Mike Ferrer, Stock thoughts: EDC, AT, MER, VITA

Learning from Tycoons

A good On the Money Episode:

http://www.youtube.com/watch?v=tCUqC766xIM

 

Mike Ferrer

A new column written by Mike Ferrer:

Invisible hand

If there is somebody worth the trouble of subscribing to Businessworld online, it would be Mike Ferrer. He is the president and managing director of ATR KimEng Asset Management.  🙂

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

P. 2/S3 or p. 22 of the .pdf file.

 

EDC

EDC 2012 core net income* increased by 89%.

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-1742_EDC.pdf

The reported net income of 9.89 B is only 6% higher than my estimated earnings. EPS to be reported will more likely to be at the same level as presented in the stock report below.

More on EDC:

https://fundamentalenthusiast.wordpress.com/2012/12/01/energy-development-corporation-pse-edc/

*Core net income means net income excluding one-time gains or losses.

 

AT

AT core income up by 46%.

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-1744_AT.pdf

P2.5B reported income is close to my projected earnings of P2.6B. EPS to be reported will more likely to be at the same level as presented in the stock report below.

More on AT:

https://fundamentalenthusiast.wordpress.com/2012/12/17/atlas-cons-mining-and-devt-corp-pse-at/

 

MER

MER reported consolidated core net income of 17B 7% lower of my projected 18B net income.

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-1768_MER.pdf

See stock report:

https://fundamentalenthusiast.wordpress.com/2012/11/10/manila-electric-company-pse-mer/

 

MER’s dividend policy should come as no surprise. MPI, the majority shareholder, is in need of cash flows. Where do you think they should source additional cash?

 

VITA

You might be interested in this case study:

https://fundamentalenthusiast.wordpress.com/2013/02/25/playing-with-vitas-par/

 

Playing with VITA’s Par

Par value is the stated amount per share in the articles of incorporation. It is a promise that no shares shall be issued below the indicated amount.

Vitarich Corporation (VITA, the Company) has been vocal in their intention to sell whole or part of the Company. [1] This statement may provide an investment opportunity for an individual investor since VITA is occasionally trading at below its par value of P1.VITA1

A patient investor can allocate below .95 and may reap a decent return should VITA be taken over or a strategic investor may infuse more cash to the Company.

RISK:

Non-occurrence if the buy-in will render the investment thesis invalid.

Sources:

  1. Clarification of news article: “Cebu firm may get Vitarich; Paje’s special mining permit”, http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-9089_VITA.pdf

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

Stock Thoughts: TSI, OM, POPI, VITA, IS

TSI

Luckily I did not buy any TSI. Partly due to istifen’s heads up with regards to TSI’s lock-up period:

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-9068_TSI.pdf

But largely because the Mercury drug backdoor was not confirmed by the company yet. It would be nice if it’s true though.

And this afternoon, the TSI disclosed that there is no basis for such rumor:

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-9099_TSI.pdf

 

OM

Speaking of backdoor….

I was looking at OM. Not in commercial operations. No long term debt. But current market cap and legal proceedings would surely put anyone off.

Anybody have thoughts on backdoor candidates?

POPI

I think POPI is to recognize substantial increase in revenues in the future due to its hotel operations. However, the fire incident that can cause POPI a nonrecurring loss of P25 M affected their promising business development.

http://newsinfo.inquirer.net/265854/tutuban-mall-blaze-put-out-but-25-firefighters-injured

POPI is currently trading at P0.56 but with a BV of 0.87. Will be watching this.

VITA

I didn’t see VITA touching .90 last Friday. 😦

Next time.

IS

What a volatile stock.

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8934_IS.pdf

I don’t think that the Company’s plans to restructure its capital will do any good for the company.

http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-8495_IS.pdf

The best way, IMHO, is for them to make good business.

Vitarich Corporation (PSE: VITA)

The Company was founded by brothers Felicianom Lorenzo, and Pablo Sarmiento in 1950 as Philippine American Milling Co. (PAMCO). Eventually, PAMCO moved to a modern feed plant in Marilao, Bulacan and adopted the “Vitarich” trade name. In 1962, Vitarich Corporation was incorporated.

Vitarich Corporation (the “Company”, VITA) has three primary products, feeds, pangasius, and dressed chicken. VITA’s other source of income is toll milling, toll hatching, and rentals of hatcheries and plants.

VITA’s feed products consist of broiler feeds, layer feeds, hog feeds, and aqua feeds. The Company cultures Pangasius or commonly known as dory fish and sells it as live, gutted and chilled, sausage, franks, dory balls, dory rolls, siomai, shanghai, skinless longaniza and embutido. Dressed chicken can mean fully dressed or gallantina (dressed chicken with head, feet, and entrails intact). The Company’s dressed chicken products are sold at unbranded basis through middlemen.

The Company incurred losses in 2011, 2010, and 2009 for 233.8 million (mm), 207.1 mm, and 230 mm respectively. The Company’s operational difficulties began when the Company’s dollar denominated debt was bloated during the Asian financial crisis. On May 31, 2007, the Company entered into a rehabilitation plan (Plan). The Plan provides, among others, the following:

A. A modified debt restructuring scheme for a period not exceeding 15 years ;
B. Payment of interest to all the Company’s creditors on the following basis:


C. Implementation of certain programs as indicated in the Receiver’s Report, particularly the change in the feeds distribution system by adopting the Farmers Enterprise System;

D. Implementation of the Plan will be reviewed on the 5th year to determine whether the effects of the Farmers Enterprise System are favorable and whether at that time, the finances of the Company could already sustain payments of increased interest rates from Year 6 onwards;

E. Also in Year 5, the creditors may be given the option to avail of Receiver’s Payment and Capital Note so that 50% of the debt will be paid on a graduated scale as set out under the rehabilitation plan, without interest, but payment may be accelerated so that the debt can be paid in 5 years at the rate of 20% per year, and the remaining 50% thereof may be converted into 40% of the outstanding capital stock of the Company.

Items A and B above is understandable where the terms are extended for a specified interest rate. Item C is a suggestion of a business strategy that creditors hope will improve VITA’s profitability. Item D is a review whether the strategy was successful or not. Item E states that creditors will have an option to have 50% of the restructured debt accelerated to be paid in 5 years at a rate of 20% per year (see illustration that follows). The remaining 50% may be converted to 40% of the outstanding capital stock of the Company.

To illustrate the acceleration option:

A debt of P 1,000,000 will be accelerated to be paid for 5 years at a rate of 20% per year.

Why would anybody be interested in investing in VITA? It may be because of VITA’s operating assets. VITA has the following feedmill capacity:

VITA’s dressing plant capacities (birds per hour) are 4,350, 1,200, and 1,500 for Luzon, Visayas, and Mindanao respectively.

Hatcheries capacity (eggs per year) is 9.9 million, 14.1 million, and 6.3 million for Luzon, Visayas, and Mindanao respectively.

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