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.


Subsidiaries

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

Fundamentals



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.

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Technicals


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.  

Analysis

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

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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.

Subsidiaries

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!, abs-cbnnews.com, 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

Fundamentals



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.

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Technicals



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? 


Analysis

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

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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.