Sunday, August 31, 2014

MSCI August QIR 2014: Effect on Total Turnover Value of the Philippine Market

I didn't monitor much of foreign fund flows until now.  The Philippine market being relatively small and illiquid can easily be swayed by the entrance and exit of foreign money.  Regardless of companies having solid fundamentals and being undervalued, if foreign investors decided to get out of our market, surely stock prices will be pulled down by the large selling of these monstrous funds.

"MSCI Rebalancing" has already been a buzzword with local investors.  Certain stocks move as based on the increase/decrease of its weight, more so with the case of inclusion/exclusion as a constituent of an MSCI index.

The announcement (w/c includes the list of concerned stocks) has been announced early August; however, the actual Rebalancing happened on August 29.  Take a look on the Total Turnover Value of the Philippine market during that time.

Philippine Market Activity

More importantly, it is good to note that Foreign buying is still dominant, which means market rise as shown through the PSE index is still being supported at this point.

Sunday, August 11, 2013

Spotlight: Vantage Equities, Inc

Business Overview

The company was originally organized for oil and gas exploration in 1992 under the name iVantage Corporation.  By October 2000, the primary purpose of the firm has been changed to financial holdings and investments, including but not limited to IT companies and related ventures.

In June 2006, the Corporation divested its shareholdings in International Exchange Bank, its single largest investment at that time.  The iBank sale generated Php2.9B.  The Corporation decided to invest its Php2.9B war chest in portfolio of equity and fixed income securities.   For this purpose, the Company hired its current President in October 2006 along with a team of finance professionals.  The current team is also tasked to further professionalize management of the Vantage Group of Companies.

Major Subsidiaries

1.) E-Business Services, Inc  (100%)
 - engaged in the fund transfer and remittance services, both domestic and abroad.  E-Business has an existing Representation Agreement with Western Union Financial Services, Inc. (top 3 among its direct agents) covering its fund transfer and remittance services for 7 years (Sept 2007 to Aug 2014).  Subsidiary, eBiz Financial handles the financing business.

2.) iCurrencies, Inc. (100%)
 - organized primarily to engage in the business of buying and selling foreign currencies.  However in 2001, a new circular issued by the Central Bank required for additional documentation including a minimum paid-up capital of Php50 Million.  iCurrencies decided to stop its business as a Foreign Exchange Corporation (FxCorps) due to the regulatory changes.  In the meantime, iCurrencies is sustained by income on its investments and interest income on its funds.

3.) Philequity Management, Inc  - PEMI (51%) 

 - an Asset Management company with about Php3B in assets under management at end of 2008.

4.) Unlaunched Funds  as of Dec 2012 (100%)
 - Philequity Balanced Fund, Inc
 - Philequity Foreign Currency Fixed Income, Inc
 - Philequity Dividend Yield Fund, Inc
5.) Yehey!
 - engaged in the business of internet online related products relating to database search engine, such as, but not limited to , conceptualizing, designing, illustrating, processing, and editing web sites.  From a pioneering web portal in the late 90's, Yehey has grown into a leading digital on-line marketing solutions provider in the country.  To support its growth, Vantage infused Php250M capital in Yehey in 2007.

Key People 

Valentino Sy - also a Philstar columnist for Philequity Corner.  Owns 3%.

Wilson Sy - Brother of the Chairman/CEO Valentino Sy.  Owns 8.77%
WillyN. Ocier -  Also involved with Belle Corporation.  Owns 0.31%

1.) Valentino L. Sy - Chairman and CEO, Director since 2002.  Holds top positions on businesses that are into steel trade.  BS Industrial Management Engineering graduate from DLSU.
2.) Edmundo P. Bunyi - President and COO, Director since 2006.  Pres & CEO of e-Business Services and Pres & COO of Philequity Management.  Former Senior Vice President and Treasurer of International Exchange Bank, AVP and Head of FX Sales of UCPB, Asst Manager for Corporate Banking for Far East Bank & Union Bank.  BS Management Engineering graduate from Ateneo.
3.) Ignacio B. Gimenez - Director since 2003.  Treasurer of I.B. Gimenez Securities, a stock brokerage firm.  President of several Mutual Funds: Philequity Fund, Philequity Dollar Income Fund, Philequity PSE Index Fund, and Philequity Peso Bond Fund.  Also Sales and Marketing Manager of Society Publishing.  Earned an MBA from AIM.
4.) Willy N. Ocier - Chairman & President, Director since 1999. Co-Vice Chair of Belle Corporation and Highlands Prime.  Chairman of APC Group, Sinophil Corporation.
5.) Wilson L. Sy - Reelected to the Board in 2005.  Brother of Valentino Sy.  Vice Chair of Asian Alliance Holdings, Director of Philequity Management.  Independent Director of Tagaytay Highlands. Former Chairman of the Philippine Stock Exchange.  Director, Basic Petroleum & Minerals, Belle Corp, A. Brown Corporation,  Jollibee Foods, among others.  Management Engineering graduate from Ateneo.
6.) Antonio Samson - Director since 2005.  Group Chairman/ Chief Business Strategist of DDB Worldwide Communications Group, an advertising company.  Former EVP in PLDT and concurrently President and CEO of MediaQuest Holdings.  MBA from AIM, Masters in Business Economics from UAP, Economics from Ateneo.
7.) Gregorio Kilayko - Independent Director in 2012, also for SMPH, BELLE, HP.  Former PSE Governor in 1996 and 2000.  MBA from Wharton.
8.) A. Bayani K. Tan - Corporate Secretary, also with other companies: First Abacus Financial, BELLE, Sinophil Corp, Tagaytay Highlands, Touch Solutions, I-Remit, Philequity Funds, TKC Steel Corporation, among others.  Managing Partner of Tan Venturanza Valdez Law Offices.  Director/Corporate Secretary of Private Companies such as : Sterling Bank, Medicare Plus, etc.  Master of Laws from New York University, Bachelor of Laws from UP.

Dividend Policy

No cash dividends have ever been declared.  In 2008, 5% property dividend was brought out distributing Yehey stocks to its shareholders, paving way to Yehey's listing by way of introduction to the PSE.

Quick Numbers


Book Value of Equity (AR 2012): ~Php6.6B
Outstanding Shares: ~2.24B

BV/share: Php 2.97

Debt Ratio (Long term): 0%
Cost of Capital: 8.4%

Net Income (Realized): 

2012 :  Php 570M
2011:  Php 530M
2010: Php 716M
time-weighted average NI: Php 587M

Net Income (Takes account of increase in market value of Assets For Sale): 
2012 :  Php 1.09B
2011:  Php 668M
2010: Php 893M
time-weighted average NI: Php 926M

A conservative assumption of long-term growth (3% yearly), would put the fair value of the company  (
based on earnings - DCF analysis) between:

Fair Value/share: Php 5.13 to 8.02

The lower FV estimate is computed from the realized Net Income while the higher FV (8.02) uses the Net Income that takes into account the market value of Assets For Sale.  Take note that in 2012, unrealized gains reached to as much as 500M due to its equity investments on a bullish environment.  For conservative purposes, I would still base my decision on the realized income having sustainable growth at 3% yearly.  At current market price of 2.58, this gives us a 99% upside in the future.  This is even below current book value.

Another factor that boosts our fair value estimate is the low Beta (0.47) which makes this stock a good addition to my portfolio.



Nothing impressive with the charts and so I mapped it with the timing of disclosures.  The decline in May coincided with the breakdown of the market and has nothing to do with the earnings results.  Earnings were actually good with a potential 500M increase if all AFS were sold.  Thus, May-June was a good opportunity to buy for value investors.  V has no history of giving out dividends, instead the company prefers share buybacks as evident on the recent activities.  Starting August, the company already had bought back at prices averaging at 2.60.


Bulk of the company's gains are basically coming from its direct investments to equity and fixed income assets.  Because of this, I believe the performance of this company is tied to general market conditions of our local market.  This is not a heavily traded stock; thus, does not move along the directions of the market.  Investing into this stock is just like getting a free ride on the investments of the Finance professionals in this company.  However, we wouldn't expect getting cash dividends but could rather gain through capital appreciation.

I'm not a fan of Yehey but I wouldn't be too much concerned with it as it is just a small part of the company.  It may be possible that they plan to leverage their digital services with their remittance/fx business soon.  Given that performance of the company's investments are good and the stock remains undervalued, I believe this is a good buy; thus, would personally include into my portfolio.  I already have a starting position on this for my speculative port and plan to increase it more.

References: Financial Statement of V (AR 2012)
                    Images via Google search

This post does not give a comprehensive analysis on the company/industry.  This is only a summary or a company snapshot as of the date it was posted.  Spotlight stocks featured in this blog are being chosen arbitrarily, and are only intended for the blog owner's personal consumption; not as a form of solicitation to buy or to sell.  Comments from readers who would like to point out errors, to share ideas, etc are most welcome. 

Sunday, June 2, 2013

Spotlight: Crown Equities Incorporated

Business Overview

The company started out engaging in exploration and development of mines under the corporate name,  Leyte Base Mining Corporation, Inc in 1969.  In 1993, the firm have shifted focus onto oil exploration and changed the name to Pacific Rim Oil and Resources Corporation.  2 years later, the board decided to divest from the oil business and shift towards being an investment holdings company.

The corporation's main business is the acquisition, development and sale of real estate properties, either through its own subsidiaries or through tie-ups with major real estate and property development companies in the field.  The corporation also delivers medical and health services to outpatients through its ambulatory care centers.

Subsidiaries and Projects

1.) Real Estate and Property Development
 a.)  Ceres Property Venture, Inc (CPVI) - organized primarily to acquire, develop and sell real estate properties.  Started commercial operations in 2010.  Owns over 4 hectares of real estate properties along Levi B. Mariano Ave in Taguig City.  CPVI has ownership interest in Cypress Towers which gave around 20% to the Corporation's total revenue for 2012 (45% in 2011).  The land where Cypress Towers now stand was owned by CEI's subsidiary.

Cypress Towers - Developed in partnership with DMCI
  b.) Crown Central Properties Corporation (CCPC) -  Joint venture with Solid Share Holdings, Inc.  In 2003, CCPC entered into a Memorandum of Agreement with Sta. Lucia Realty whereby land is formed by the latter and CCPC shall be responsible for completing the development of the subdivision project.  Sharing agreement was 60-40% in favor of CCPC.

Palma Real - In partnership with Sta Lucia Realty.  Project completed and marketing in progress.  Contributed 25% to Total Revenue in 2012
c.) CEI Development Corp (CEIDC) - owns over 50 hectares of real estate property in Sto. Tomas, Batangas.  Some of the properties are still in the process of titling.  Sells house units for buyers in Palma Real Residential Estates.

d.) Parkfield Land Holdings, Inc (PLHI) - 75% owned subsidiary of the Corporation.  PLHI owns 92 hectares of land located in San Jose del Monte, Bulacan.  No significant business development so far.

2.)  Healthcare 
a.)  Healthcare System of Asia Phils, Inc - contributed 41% of Total Revenue for the year 2012

FortMed Medical Clinics  
- Makati clinic (Jupiter St) started out in 1997 while the 2nd clinic located at Sta Rosa, Laguna started in 1998.

Makati clinic is located within the vicinity of Bel-Air Village while the Laguna clinic is located in Greenfield Business Park, Sta. Rosa.

Key People 

1.) George L. Go - Chairman of the Board.  Also the chairman of the ff: Healthcare Systems of Asia Philippines, Asian Alliance Holdings  and GLG Crown Holdings.  Also a director of Shang Properties, Inc. and Asian Alliance Investment Corporation.  BS Econ grad from Youngstown University in the US and completed an advanced management program in Harvard Business school.
2.) Wilfrido V. Vergara - Vice Chairman of the Board.  He is Chairman/Vice Chairman/Director of most subsidiaries under CEI.  Obtained Bachelor's degree from Ateneo.
3.) Ramon Recto - Independent Director, member of Audit and Nomination committee.  President of Marcventures, former president of Lepanto Mining Corporation.  BS EE/ME from UP and MS Industrial Management from the same university.
4.)  Isidro Consunji - Independent Director.  President of DMCI and Director of other companies such as Semirara Mining, Atlas Mining, Carmen Copper, DMCI , among others.
5.) Patrick Warren Go - Director.  Managing Director of Healthcare Systems of Asia Phils.   Former VP at Banco De Oro.  Bachelors graduate of Finance and Real Estate from San Francisco University.  Son of George L. Go. 

Dividend Policy

No dividends have been declared over the past 3 years.

Quick Numbers


Book Value of Equity (AR 2012): ~Php1.68B
Outstanding Shares: ~13.6B

BV/share: Php 0.123

Debt Ratio (Long term): 0%
Cost of Capital: 10.4%

Net Income: 

2012 :  Php 13.5M
2011:  Php 22.19M
2010: Php 12.4M

time-weighted average NI: Php 15.88M

A conservative assumption of long-term growth (3% yearly), would put the fair value of the company  (
based on earnings - DCF analysis) at around:

Fair Value/share: Php 0.033

As of May 31, 2013, current market price is at 0.081 which is already way beyond our fair value price in terms of growth.



CEI has been trading on range between .062 and 0.089.  Last time it reached its peak was on March 2012.  I only got interested with this stock lately when I saw the huge volume transaction for May 31, 2013.  It turns out that it was just a cross-trade within Public Securities for some reasons unknown.  For other days, CEI remains to be illiquid despite a public float of 71%.


CEI's source of growth for the short term would come from sales of units from the Palma Real project.  Although the Cypress Towers project would still continue to generate revenue, most of the profit already came in as early as 2011.  CEI's landbank through its subsidiaries remain idle and has no business prospect yet within the year.

Majority of the corporation's revenues is still expected to come from its health care business.  However, I noticed through their financial statements that operating expenses outrun their revenues.  This is definitely not sustainable especially when I see that it has been already the case for the last 3 years.

Current market price at .081 is lower than the book value of 0.12 which may be of interest for value players out there.  Personally, I am looking for an undervalued stock with growth potential and the latter is what CEI lacks for now.  If ever I am going to buy using technicals, I think I'd rather wait at 0.06 levels which is near the trading range support.

References: Financial Statement of CEI (AR 2012)
                    Images via Google search

This post does not give a comprehensive analysis on the company/industry.  This is only a summary or a company snapshot as of the date it was posted.  Spotlight stocks featured in this blog are being chosen arbitrarily, and are only intended for the blog owner's personal consumption; not as a form of solicitation to buy or to sell.  Comments from readers who would like to point out errors, to share ideas, etc are most welcome. 

Sunday, February 3, 2013

Spotlight: The Philodrill Corporation (OV)

Business Overview

Philodrill Corporation was incorporated in 1969, with the primary purpose of engaging in oil, gas and mineral exploration and development.  The company has also registered being a diversified holding company, investing in petroleum exploration and production, financial services, property development, mining and infrastructure development, as its secondary purpose.

The company's active petroleum projects cover production and exploration areas in offshore Palawan and South Sulu Sea and onshore Mindoro under various Service Contracts (SC) with the Philippine government through the Department of Energy (DOE).

In the financial services sector, the company is a 40% shareholder of Penta Capital Investment Corporation (Penta Capital), an investment house.

In the mining sector, the company holds minor equity interests in the following companies: Atlas Consolidated Mining, Vulcan Industrial & Mining Corporation, and United Paragon Mining Corporation.

Petroleum Projects

1.) SC 14 (Nido, Matinloc and North Matinloc) - in production.  Block operator: OV.  For further revaluation.  Based on crude oil sales agreement, all were sold to Pilipinas Shell generating 11% of total gross revenues.  OV interest 26.106%, 41.608%, 33.111% respectively.
2.) SC 14 C-1 (Galoc - Northwest Palawan) - in production. onto Phase 2 development.  Field operator: Galoc Production Company (GPC).  Other Partners: Nido Petroleum Phils, OPM, FEP. 7.21495% OV interest.  Oil being sold to foreign companies (i.e. GS Caltex Singapore, SK Energy International)
3.) SC 14 C-2 (West Linacapan) - Block operator: Pitkin Petroleum.  50% JV with Resource Management Associates Pty.  7.0175% OV interest
4.) SC 14 (Retention Block, Tara, and Libro) - no exploration.  Operator: OV. 33.751%, 27.5%, respective OV interest.
5.) SC 6A (Octon - Northwest Palawan) - new block operator : Pitkin Petroleum.  Partners: PetroEnergy Resources Corp, Anglo Phil Holdings, Trans-Asia Oil & Development, Forum Energy Philippines, Philex Petroleum, Alcorn Gold Resources Corp.  15.495% OV interest.  Status: Exploration
6.) SC 6B (Bonita - Northwest Palawan) - farm-in groups: VenturOil Philippines, Peak Oil and Gas Phil Ltd., Blade Petroleum Philippines Ltd.  Transfer and assignment of block operatorship from OV to Peak Oil, if approved.  Other partners: Phoenix Gas&Oil Explo Co, Oriental Pet. & Minerals Corp., TA, FEP, Alcorn Gold Resources, Corp.  6.5625% OV interest.  Status: Exploration.
7.) SC 41 (Sulu Sea) - still looking for prospective partners 
8.) SC 53 (Onshore Mindoro) - block operator: Pitkin Petroleum.  Evaluation progressing.  Other Partners: RMA Pty, APO, Basic Consolidated Mining Corp. (BSC). 22% OV interest. Expiry date: 7/2014.  Status: Exploration.
9.) Swan Block - ongoing negotiations with PNOC-EC

Key People 

Son of National Bookstore founder, Soccoro Ramos.
Chairman/President of Atlas Mining

Listed as #30 in the Forbes' list of top 40 Richest in the Philippines, the Ramos family has been actively involved in transporation, oil & gas exploration, mining, property development, etc.  The family started out with the success of National Bookstore, founded by Mrs. Soccoro Ramos, Alfredo's mother.

1.) Alfredo C. Ramos - President/CEO and Chairman of the Board. Held directorship in Atlas Mining (AT), Anglo Philippines Holdings (APO), MRT Development Corp, National Book Store (NBS), Shang properties (SHANG), United Paragon Mining (UPM), Vulacan Mining (VUL), etc.
2.) Nicasio Alcantara - Independent Director.  Held directorship in Alsons Corporation (ACR), BDO Private Bank, Seafront petroleum.  Listed #5 top shareholder (0.1892%)
3.) Christopher M. Gotanco - Director. Held directorship in APO, Boulevard Holdings (BHI), MRT Dev Corp., Penta Capital, VUL.
4.) Honorio A. Poblador III - Independent Director.
5.) Presentacion S. Ramos - Director.  Held directorship in Alakor Securities, APO, NBS, VUL.  Wife of Alfredo Ramos.
6.) Adrian S. Ramos - Director. Held directorship in Alakor Securities, APO, AT, Carmen Copper, UPM, VUL.  Son of Alfredo and Presentacion Ramos.
7.) Augusto Sunico - Held directorship in Alakor Securities,Anglo Philippines Holdings, Manuel L Quezon University, Penta Capital, UPM, VUL.  Brother in law of Alfredo Ramos.
8.) Marciano Padilla - Director.  Held directorship in AT, Padi's Point Restaurant Group.

Companies among the 20 Top Stockholders

1.) Alson Consolidated Resources, Inc - 0.2953% (#2)
2.) Vulcan Industrial & Mining Corp - 0.1201% (#10)
3.) Ayala Corporation - 0.098% (#13)

Dividend Policy

Subject to availability of funds and balance of Retained Earnings.  Previous Dividend Yields register to around 3-5%.

Quick Numbers


Book Value of Equity (3Q 2012): ~Php3.19B
Outstanding Shares: ~191.9B

BV/share: Php 0.0166

Debt Ratio (Long term): 0%
Cost of Capital: 10.9%

Net Income: 

2012 3Q:  Php 283.5M (projected)
2011:  Php 1.065B
2010: Php 557M

2009: Php 108.6M
2008: Php 15.1M   

time-weighted average NI: Php 555M

A conservative assumption of long-term growth (3% yearly), would put the fair value of the company  (
based on earnings - DCF analysis) at around:

Fair Value/share: Php 0.038

The latest price as of 2/1/13 is Php 0.044.  Oil production has still not been consistent as some sites may be needed to be closed for added improvements.  The company is also finding ways  to lessen the cost and to improve production.  This earnings projection only involves income coming from the production sites.  Potential income coming from the other sites currenly being explored has not yet been factored in.  Opening of an oil well could result to a huge gain in revenues.  Assuming by 2013, OV's target of Php1B net income is to be realized moving forward, then we can raise the stock's fair value price at around 0.078, even at conservative growth levels.



One year major support line stands at 0.038.  There has been exuberant buying last year which pushed prices up to 0.061.  Tracing on past news, the run-up was caused most likely by the 5% cash dividend declaration in February, for which the stock price went back towards support at ex-div.  Technical indicators still show weak momentum.  An anticipated cash dividend declaration may not provide enough catalyst, given that last year's income were not as big as in 2011; cash div may not be that big.


It may be a coincidence that the 1-year support line is equivalent to our conservative fair value at 0.038.  If one remains to be bullish in our upstream oil industry; thereby hopeful that exploration efforts down south are going to be fruitful, then buying at current levels is relatively safe.

The company forecasts its income to reach the Php1B mark next year and may even double in 2014.  Although be reminded that this is more of a company target and is still subject to market conditions (oil prices) and the finishing of new oil wells.  

PD:  I have entered initially into OV at 0.044 based on technicals as prices broke a minor resistance at 0.042, and is now above the ichimoku cloud.  Given this recent research on the company's fundamentals pointing current prices are at fair value, I only intend to trade this stock within a range.  I believe this one will still remain a sleeper until new oil wells are declared to be open.

References: Financial Statements of OV (3Q 2012, AR 2011)
                    Images via Google search

This post does not give a comprehensive analysis on the company/industry.  This is only a summary or a company snapshot as of the date it was posted.  Spotlight stocks featured in this blog are being chosen arbitrarily, and are only intended for the blog owner's personal consumption; not as a form of solicitation to buy or to sell.  Comments from readers who would like to point out errors, to share ideas, etc are most welcome. 

Sunday, January 20, 2013

Spotlight: Lopez Holdings Corporation (LPZ)

Business Overview

Formerly named Benpres Holdings Corporation, Lopez Holdings was incorporated in 1993 by the Lopez family to serve as the holding company for investments in major development sectors such as broadcasting and cable; telecommunications; power generation & distribution; and banking.  It added to its portfolio, investments in other basic service sectors but has since sold its interest in banking, toll roads, information technology, property development and health care delivery.

Its current interests are in multimedia communications, including broadcast, cable and telecom, and power generation, especially in the development of clean, indigenous and/or renewable energy sources.  No new business were developed in the last three years.


1.) ABS-CBNBroadcasting Corporation (60.3%)  - Broadcasting and Communications
2.) Amcara Broadcasting Network, Inc.  (49%) - Broadcasting and Communications
3.) Bayanmap Corporation (51%) - Information Service Provider
4.) Bayan Telecommunications Holdings Corporation (BayanTel) (47.3%) - Telecommunications
5.) First Philippine Holdings Corporation (46.6%) - Power Generation and Distribution
6.) Star Cinema Productions, Inc (45%) - Movie Production
7.) Sky Vision Corporation (33.1%) - Investment Holdings

Key People 

Manuel M. Lopez, Chairman and CEO of LPZ

1.) Oscar M. Lopez - Chairman Emeritus.  Former President and CEO.  Also Chairman Emeritus of First Philippine Holdings (FPH) and a director of Rockwell Land and ABS-CBN.  BA and MA in Public Administration, Harvard.
2.) Manuel M. Lopez - Chairman and CEO.  Former Meralco President (1986-2001) and Chairman (2001-2012).  Current Chairman of Rockwell Land, Sky Cable and Bayan;  Vice-chairman of Lopez Inc; and a director of FPH, among others.  BSBA from Harvard.
3.) Eugenio L. Lopez III - Vice Chairman.  Chairman and CEO of ABS-CBN since 1997; Director of SkyCable and Vice Chair of the board & President of Bayan, among others.  MBA from Harvard.
4.) Felipe B. Alonso - Director.  Co-Vice Chairman of the board of Trustees of the Asian Institute of Management (AIM); former president (1990-1999).  Law from Ateneo and MBA from New York University.
5.) Washington Sycip - Independent Director.
6.) Cesar E.A. Virata - Independent Director. Director and Corporate Vice Chairman of RCBC.  Former Prime Minister of the Philippines (1981-1986).  BSME and BSBA from UP; MBA from University of Pennsylvania.
7.) Salvador G. Tirona - Director, President, COO, CFO.  Former Director and CFO of Bayan; Former CFO of Maynilad.
8.) Federico Lopez - Treasurer.  Chairman and CEO of FPH and First Gen Corporation.  Director of ABS-CBN and FGEN subsidiaries.   Graduated from University of Pennsylvania.
9.) Miguel L. Lopez - Vice President and Head of Corporate Affairs.  Director of Rockwell Land.

* Oscar and Manuel Lopez are brothers.  Eugenio Lopez III is their nephew.  Federico Lopez is Oscar's son while Miguel Lopez is Manuel's.

Dividend Policy

Subject to approval by the Board.

History of Default

LPZ (then Benpres Holdings) had a history of defaulting from its debts.  The company declared a standstill in 2002 with as high as $560 million in debt obligations.  For a decade, they have been restructuring their debt payments, some of which were paid at 65% of the principal amount while the others were earlier paid back at par.  Lopez Holdings got hit hard by the Asian Financial Crisis in the late 1990s, wherein the peso depreciated greatly amid huge dollar loans.

Quick Numbers


Book Value of Equity (3Q 2012): ~Php56.18B
Outstanding Shares: ~4.58B

BV/share: Php 12.26

Debt Ratio (Long term): 19%
Beta: 0.94
Cost of Capital: 6.4%

Net Income: 

2012 3Q:  Php 9.12B (projected)
2011:  Php 5.05B
2010: Php 14.53B

2009: Php 12.69B   

time-weighted average NI: Php 9.34B

A conservative assumption of long-term growth (3% yearly), would put the fair value of the company  (
based on earnings - DCF analysis) at around:

Fair Value/share: Php39.88 

As of January 18, 2013, the closing price is at 6.78 at conservative growth estimates makes this another multi-bagger stock.  This makes sense as we also gave a high valuation on ABS-CBN, to which LPZ owns 60%.  Other than the media industry, the company is also exposed to the power sector, having great growth prospects in the Philippines.  The earnings; however, may be a bit bloated due to the company's previous sales of stakes (i.e. Meralco) which are non-recurring gains.



Given strong fundamentals based on the company's yearly earnings for the past 4 years, I now view the chart from a long term perspective.  Recent prices are now flirting with the 3 year high of 6.8.  Either this will become a new support or (hopefully not) a bull trap.  If it continues to go up further, it may follow the up trend range (green); else, need to setup a cut loss point somewhere below 6.8.  


The high valuation of LPZ is consistent with the recent valuation of ABS for which is majority-owned by the company.  The difference for the 2 stocks would be LPZ's exposure on the power sector which gives the benefit of diversification as compared to being fully exposed to the media sector only (ABS).  In effect, LPZ will also earn more due to the election season, plus revenues coming from electricity generation when new plants become operational.

As the charts still show some vague bullishness, I have already entered initially and will accumulate more if ever prices drop in the short term. The Lopez family aims to wipe out all their debts (around $7.5million left) as they have already sold assets and stakes in other companies (i.e. Meralco).   New investments will be pushed through after the restructuring is over.

References: Financial Statements of LPZ (3Q 2012, AR 2011)
                    Images via Google search

This post does not give a comprehensive analysis on the company/industry.  This is only a summary or a company snapshot as of the date it was posted.  Spotlight stocks featured in this blog are being chosen arbitrarily, and are only intended for the blog owner's personal consumption; not as a form of solicitation to buy or to sell.  Comments from readers who would like to point out errors, to share ideas, etc are most welcome. 

Saturday, January 12, 2013

ABS-CBN Corporation (ABS)

Business Overview

ABS-CBN Corporation (“ABS-CBN” or the “Company”) is the Philippines’ leading information and entertainment multimedia conglomerate. The Company is primarily involved in television and radio broadcasting, as well as in the production of television and radio programming for domestic and international audiences and other related businesses.

Throughout the years, the Company has evolved from a purely broadcasting business into a thriving multimedia content and distribution conglomerate that continues to be in the service of the Filipino. ABS-CBN has diversified its revenue sources; from relying mostly on airtime advertising revenue, the Company now sources about 40% of its sales direct from its consumers in the form of subscription and other services and goods.


1.) ABS-CBN Film Productions, Inc  - more popularly known as Star Cinema, is the country's leading film and producer and distributor.
2.) ABS-CBN Global Ltd. - Pioneered the country's international direct-to-home (DTH) and cable channel service through The Filipino Channel (TFC).
3.) ABS-CBN Interactive, Inc. - manages the company's new media ventures and strategies.  This includes Pinoycentral, TFCNow!,, etc.
4.) ABS-CBN Publishing, Inc - Currently has 13 glossy magazine titles, anchored by Metro, the country's leading fashion and lifestyle magazine.
5.) Creative Programs, Inc. - manages and operates the Company's 7 cable channel offerings: CinemaOne, Myx, Hero, Lifestyle Network, Velvet, Balls
6.) Sarimanok News Network, Inc / ABS-CBN News Channel (ANC)  - the only 24/7 Filipino cable news channel in the country.
7.) Sky Cable Corporation (56.7%) - country's largest cable TV service provider, and now also offering broadband services.
8.) Star Recording, Inc. (Star Records) / Star Songs - recording outfit for multi-talented artists; also handles the Company's music publishing and composing requirements.
9.) Studio 23, Inc - country's "free cable" channel.
10.) ABS-CBN Foundation - non-stock, non-profit organization for public service.  Includes Bantay Bata, Sagip Kapamilya, etc.

Key People 

1.) Eugenio L. Lopez III - Chairman of the Board of Directors/ CEO. Vice Chairman of Bayan Telecommunications, Director of Sky Vision Corporation; Director/Treasurer of Lopez Holdings Corporation; Director of First Gen Corporation.  MBA from Harvard University.
2.) Augusto Almeda-Lopez - Vice Chairman.  Vice Chairman of First Philippine Holdings; Director for First Philippine Industrial Corporation, First Gen Renewables, Sky Vision Corporation, Bayan Telecommunications, etc.  UP Law '1952
3.) Ma. Rosario Santos-Concio - Board Member, President and COO.  Also known as an actress, film and tv producer.  She hosts the longest drama anthology, Maalaala Mo Kaya. 
4.) Oscar M. Lopez - Director. Chairman Emeritus and Chief Strategic Officer of First Philippine Holdings Corporation; Chairman Emeritus of Lopez Holdings Corporation, First Gen and Energy Development Corporation. Vice Chairman of Rockwell Land.  BA and MA in Public Administration, Harvard.
5.) Federico R. Lopez - Director. Chairman and CEO of First Philippine Holdings; Chairman and CEO of First Gen and Energy Development Corporation; Board Member of FPH and EDC.
6.) Manuel M. Lopez - Board Member. Chairman and CEO of Lopez Holdings Corporation; Chairman of Meralco, Rockwell Land, Bayan Telecommunications, SkyCable and INDRA Philippines; Vice Chairman of FPH; Philippine Ambassador to Japan.
7.) Salvador G. Tirona - President and COO of Lopez Holdings Corporation. Former CFO of Maynilad and Bayan.

Dividend Policy

Total amount of cash dividends does not exceed 50% of the Company's net income after taxes for the fiscal year preceding the declaration.

Quick Numbers


Book Value of Equity (3Q 2012): ~Php21B
Outstanding Shares: ~779.6M

BV/share: Php 27

Debt Ratio (Long term): 37%
Beta: .45
Cost of Capital: 6.4%

Net Income: 

2012 3Q:  Php 1.82B (projected)
2011:  Php 2.51B
2010: Php 3.24B

2009: Php 1.76B   

time-weighted average NI: Php 2.3B

A conservative assumption of long-term growth (3% yearly), would put the fair value of the company  (
based on earnings - DCF analysis) at around:

Fair Value/share: Php195.30 

As of January 11, 2013, the closing price is at 39.85 at conservative growth estimates makes this a potential 4 bagger blue-chip stock!  Although keep in mind, the market values a stock differently.  This is no guarantee that target price will be reached within a short time frame.



This is a 3-year chart highlighting previous high levels.  Seems like a consolidation stage for now, but once it breaks the 41.75 resistance line (4.8% more), next stop is 56 (that's already 40% upside).  If you notice the volume bar graphs below the line chart, period of noise came about around 2010 and now in 2013.  The rest in between is just consolidation.  Elections anyone? 


ABS-CBN is one silent behemoth just waiting on a corner.  The company has been very profitable with an average of Php2B net income per year.  Around Php10B is just sitting around in its equity bin, perhaps waiting for a big project to come.  No wonder this cash-rich company can even further leverage itself with low interest bearing loans, having a healthy credit line among banks.

The charts may not show much bullishness for now, but with the elections scheduled this year, interest on media stocks will likely pick up as earnings are expected to increase dramatically.  This stock is also nice to put in a portfolio, with its low beta at .45.

Whether it is election season or not, this is definitely a blue chip worth investing for the long term.

References: Financial Statements of ABS (3Q 2012, AR 2011)
                    Images via Google search

This post does not give a comprehensive analysis on the company/industry.  This is only a summary or a company snapshot as of the date it was posted.  Spotlight stocks featured in this blog are being chosen arbitrarily, and are only intended for the blog owner's personal consumption; not as a form of solicitation to buy or to sell.  Comments from readers who would like to point out errors, to share ideas, etc are most welcome. 

Wednesday, December 26, 2012

Spotlight: RFM Corporation (RFM)

Business Overview

RFM Corporation (the “Company”) is a major player in the food and beverage industry in the Philippines, specifically in the processing and manufacture of flour, flour-based products, milk and juice drinks, canned and processed meats, ice cream, and bottled mineral water.

The Company also operates non-food businesses, which include barging services (Rizal Lighterage Corporation) and insurance brokerage (RFM Insurance Brokers, Inc.), and leasing of commercial / office spaces (Invest Asia Corporation).

RFM meant "Republic Flour Mills",  which was the name of the company during its incorporation. From its original business of flour milling, the Company diversified into poultry and livestock production and areas of food manufacturing that includes flour-based products, margarine, milk & juices, canned and processed meat, ice cream, and bottled mineral water.


1.) Cabuyao Meat Processing Corporation - produces hotdogs, corned beef, hams, and other meat products under the Swift brand.
2.) Interbake Commissary Corporation - operates a high-speed Bun Production Line. It’s first, and continues to be the biggest customer, is McDonald’s. Interbake supplies the bun
requirements to McDonald’s over 260 stores in Luzon and now includes other clients such as KFC and Wendy's.
3.) RFM Equities, Inc and Subsidiaries - It was organized in 1996 to hold and manage RFM Corporation’s holdings in two small financial services subsidiaries – Conglomerate Securities and Financing Corporation (CSFC) and RFM Insurance Brokers, Inc. (RIBI).
4.) RFM Foods Philippines Corporation - ceased operations; former joint venture with Indofoods.
5.) Southstar Bottled Water Company, Inc.
6.) Swift Tuna Corporation
7.) Invest Asia Corporation (96%) - owns the RFM head office and land.  Leases commercial and office spaces to its affiliates and third party tenants.
8.) FWBC Holdings, Inc and subsidiary (84%) - FWBC is involved in the processing and distribution of bottled mountain spring water.
9.) Rizal Lighterage Corporation (94%) - barging company
10.) RFM Canning and Marketing Corporation (70%)
11.) WS Holdings (60%) - 40% owned by Unilever .  Incorporated to invest in, purchase and own shares of stocks, bonds and other securities of obligations including real estate and personal property of any foreign or domestic corporation, or partnership, or association.
12.) Unilever-RFM Ice Cream, Inc (50%) - It is engaged in the business of manufacturing, marketing, distributing and selling, importing and exporting of ice cream and similar food products.
13.) Selecta Wall's Land, Inc (35%) - incorporated in 1999 to acquire, own, use, develop and hold for investment all kinds of real estate.


RFM Corporation operates two major business segments:
1. Institutional Segment which primarily manufactures and sells flour, pasta, bakery and other bakery
products to institutional customers (40% of total Sales)
- Brands: Republic Special, Cinderella, Altar Bread, Milenyo, Hi-Pro Majestic, SeƱorita
2. Consumer segment, that manufactures and sells ice cream, meat, milk and juices, pasta products,
and flour and rice based mixes. (60% of total Sales)
- Brands: Sunkist juices, Alo Green Tea, Selecta Moo, Selecta Milk, Vitwater, Swift Meat products, Fiesta Spaghetti, White King hotcakes, Fiesta Meaty sauces, etc.

Key People

1.) Jose S. Concepcion, Jr - Chairman of the Board, CEO of RFM Corporation and Swift Foods, Inc.  Founding Chairman of NAMFREL.  Member of the Board of Philtown Properties, Inc.  Former DTI Secretary, Chairman of the Board of Investments, Member of the Central Bank Monetary Board (1986-1991).
2.) Ernest Fritz Server - Vice Chairman of the Board of Directors in RFM.  Member of the Board: Philtown Properties, Inc, One Mckinley Place, RFM Equities.  President of Philam Fund, Inc.  Wharton MBA Graduate.
3.) Jose Ma. A. Concepcion III - President and CEO of the Corporation. Chairman of the Board : Cabuyao Meat Processing Corporation, Interbake Commissary Corporation, RFM Equities, RFM Insurance Brokers, Filipinas Water Bottling Company, Unilever RFM Ice Cream.  Vice Chairman of One Mckinley Place.
4.) Romeo L. Bernardo - Independent Director.  Chairman of Ayala Life Peso/Dollar/Euro Bond Funds and Philippine Stock Index Fund.  Board member of Ayala Plans, Ayala Life, Globe Telecom, Bank of Philippine Islands, PHINMA, Institute of Development and Econometrica Analysis, Aboitiz Corporation, and many more.  BS Business Econ grad (mcl) from UP and MA Development Economics (valedictorian) from Williams College (Massachussetts).
Jose S. Concepcion, Jr.  

Quick Numbers


Book Value of Equity (3Q 2012): ~Php5.38B
Outstanding Shares: ~3.16B

BV/share: Php 1.70

Debt Ratio (Long term): 28%
Beta: .68
Cost of Capital: 8.2%

Net Income: 

2012 3Q:  Php 588M (projected)
2011:  Php 508M
2010: Php 625M

2009: Php 365M   

time-weighted average NI: Php 549M

A conservative assumption of long-term growth (3% yearly), would put the fair value of the company  (
based on earnings - DCF analysis) at around:

Fair Value/share: Php5.04 

As of December 21, 2012, the closing price is at 4.9 which gives us room for about 3% upside towards our conservative target price.



I was able to buy RFM last December 11 right before it's run up.  Not yet knowing its fundamentals, I bought this stock based on the chart only, and I guess was lucky that I got in with a "barat" bid before prices went up.  You can see from the chart that the stock's price has been traded on a range since late August.  Bollinger Bands constricted until the candlesticks for 12/7 and 12/10 showed bullishness, breaking out from the band.  


This is a good case on how Technicals + Fundamentals work hand in hand.  I was able to enter the stock basing on its charts (faster to read charts than to scan through financial statements).  Fundamental analysis can act as a confirmation for the buy and help to achieve conviction.  For stocks having good fundamentals, if ever prices go down, it's ok for me to buy more.

For RFM, the recent parabolic rise brought the stock straight to my conservative target price.  I no longer intend to add up, but will still hold to ride the momentum.  Possible sell signal for me would be when prices touch the 20 Moving Average.  HOLD.

References: Financial Statements of RFM (3Q 2012)
                    Images via Google search