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. 

7 Month Breakout for Lopez Holdings

Entered today on LPZ due to a breakout from a 7-month high.  As shown in the DMI, the up trend is strong; thus, would likely to continue further.  Breakout point is at 6.62, and ATR has been heavily buying at 6.66.  Hopefully they would provide enough support before the stock price goes high.  Prices closed strongly at 6.7.

On the fundamental side, MVP expressed his intent on increasing his hold on MER.  This may be one of the reasons for its bullish stride since LPZ is ready to sell its remaining stake of the power distribution company at a premium.  I think it is somewhere around 300-350 per share or even higher. (related news - Jan 2011).  On the contrary, as I was scouring the net for the latest news on the possible sale, it seems like the Lopez group would still like to hold on to its remaining board seat in Meralco. (news as of May 11 2011).  Interesting, huh?

Anyway, even without the Meralco story, LPZ have solid earnings coming from its subsidiaries such as ABS and FPH (parent of power generator FGEN).  Though for the comparison of earnings between 2009 and 2010, it should be noted that FPH has sold some of its shares of MER to the Pangilinan group (non-recurring income).  For the long term, LPZ can also be a turnaround story as they aim to wipe out their 100 million deficit by this year. 

This is just a momentum play for me now.  Will apply some trend following rules.