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

Fundamentals

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

Outstanding Shares: ~191.9B

BV/share: Php 0.0166


Debt Ratio (Long term): 0%
Beta: 0.925
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.

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Technicals

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.

Analysis

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

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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. 

Spotlight: Atlas Consolidated Mining and Development Corporation (AT)

Business Overview

Atlas Mining came from a merger between three pre-war mining firms (Masbate Consolidated, Antamok Goldfields and IXL).  A major restructuring of the Company's assets was undertaken in years 2004 and 2005 with the creation of 3 special purpose subsidiaries to develop the Toledo Copper Complex, Berong Nickel Project and the Toledo-Cebu Bulk Water and Reservoir Project.  As a result, Carmen Copper Corporation (CCC), Berong Nickel Corporation (BNC) and AquAtlas Inc (AI) were incorporated and, subsequently, were positioned to attract project financing as well as specialist management and operating expertise.  In addition, Atlas Exploration, Inc to host, explore, and develop more minerals, including but not limited to copper, gold and nickel. (source: Annual Report 2011)

Since most projects are being done through joint ventures and project financing, Carmen Copper, (which is now 100% owned by Atlas) is being considered as the lone significant subsidiary of the company.

Atlas Exploration Inc (100%) - searching, prospecting, exploring, and locating ores and other mineral resources

AquAtlas, Inc (100%) - provision and supply of bulk water to local water districts and other customers.  i.e. Toledo-Cebu Bulk Water and Reservoir Project.

Amosite Holdings, Inc (100%) - holds assets for investment purposes

Carmen Copper Corporation (100%) - country's largest exporter of copper concentrate

Ulugan Resources Holding, Inc (70%) -  URHI owns 60% of Nickeline Resources Holdings, Inc.  While NRHI owns 60% of Berong Nickel Corporation.

Significant stakeholders:

1.) Alakor Corporation (20%) - represented by Alfredo Ramos 

2.) SM Investments Corporation (18%) 

3.) BDO - credit line facility of 129M.  BDO also currently holds convertible debt instruments.

4.) Consunji Group - Just recently (April 2012), the group bought a 5.3% stake on AT, further expanding their business portfolio with mining.

Significant personalities:

1.) Alfredo C. Ramos - President and Chairman of AT since 2003.  Other companies he manages:

Carmen Copper, Berong Nickel, Alakor Corporation, National Bookstore, Anglo Philippine Holdings, Philodrill Corporation (OV), Vulcan Industrial (VUL), and United Paragon Mining (UPM).

2.) Hans Sy - Vice chairman of AT.  Director of SM Prime Holdings (SMPH), China bank (CHIB), Highlands Prime (HP), etc.

3.) Jose Sio - EVP and CFO of SM group. Director of AT, Belle Corporation, China Bank, Manila North Tollways, among others.

4.) Walter Wassmer - Director of AT since 2010. SVP of BDO and Director of BDO Leasing.

Quick Numbers:

Fundamentals

Book Value of Equity (AR 2011): ~Php26B

Outstanding Shares: ~ 1.76B

BV/share:  Php14.85

Debt Ratio: 18%

Beta: 1.21

Cost of Capital: 11.2%

Net Income:

2012 (estimate from CCC and Berong): Php2.48B

2011 (non-recurring): 1.37B

2010: -847M

2009: -2.22B

Assuming only conservative long term growth of 3%, the value of Atlas Mining based on its earnings would only be around:

Fair Value per share: 10.82

Current market value as of April 27,2012 is 19.3.  To justify current values, Atlas Mining should target higher long term growth at 7% for which target price by then would be at around 22 per share.

Based on AT's financial statements, income reached around Php 15B, however most of this just came from the increase in fair value coming from the increased stake of AT over Carmen Copper.  If we base our net income projections only on recurring income from its mines, we only get the above values.

Do take note that we only base our computations from existing operations, primarily on CCC and Berong Nickel mines.  Other significant sources of income for the firm should be included (if there are any).

From here, we would assess that AT is fairly valued at current market price.  AT is just starting to turnaround coming from negative earnings of previous years.

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Technicals:

The 2 year chart shows a major resistance at 19.8 while trying to maintain a positive long term trend.

Tightening of Bollinger bands has been observed at the start of April.  There has been a significant increase in volume transactions which favored the buy side, further pushing up prices towards 19.8 resistance.  Going past 19.8 would be a significant breakout as AT may continue further on its up trend move.  Meanwhile, a short term support is set at 18.9.

The increase in volume may be attributed to DHC (Consunji Group) having an interest on AT which eventually led to the buying of a minority stake of Atlas Mining.

Personal Disclosure: Bought AT last April 20 for an initial position after it went past 18.9 with significant volume.  This is more of a technical play and will be traded only for the short term.

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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. 

Waiting for the Bull [June 27-July 1]

I guess "pick of the week"s (POWs), which are heavily based on Technical analysis, are effective only on a bullish market since all you have to do is pick the fastest horse.  As for a sideways market, anything goes.  Fundamental analysis is still champion.  And of course on a down market, just avoid, take profits and cash out.

I'm around 20% cash right now, waiting for confirmation of a bull market.  Right now, prices seem to be near resistance and I hope it will break.  I'm waiting at around 4340 before I go bullish.  Still thinking if I'm willing to put 90% of my assets into equities by then.

This week, stellar performance shown by the mining sector, especially AT and PX.  Too bad I got out with AT with a loss, good thing I still have my PX.  Seems like one can't be wrong with a long position in mining.

Picks of the Week [June 13-June 17]

The Market still does not seem good especially with the near-200 hundred drop in DOW at the end of this week.  PSEi might follow suit and break the support at 4180.

Last week's pick did not fare well as AT touched support at 16.9.  I have to cut my losses on this stock, unless it suddenly goes up on Monday.  Volume on Wednesday shows that sellers might still follow through.

I am sort of bearish since last week, but I have noticed MER's technicals to be good.  MACD buy signal plus a cross on 20SMA over 50SMA confirming the up trend.  There have been news reports about a possible joint project with one of Warren Buffet's investment firms regarding LNG (Liquefied Natural Gas).  Some developments regarding increase of rates and decrease in fees might have helped in making the prices go up.  I tried entering last week at 266, but couldn't catch up as it went straight to 279.  Will wait further on dips at 272.4.

Picks of the Week [June 6-June 10]

Last week, my sole pick was PX for the continuation of the mining play and for the PPC dividend, a way of listing by introduction of Philex Petroleum.  I did buy PX on the first 2 days of the week, doubling my position in the process.    PX prices was volatile as it reached a low of 20 to a high of 21.75.  Closing price was at 20.45, a bit lower than my average cost at 20.58.  21.75 can be set as a Resistance for now, and I aim to unload some shares near that price.

As the PSEi only shows a sideways trend, with current prices seem to be correcting, I am looking to sell most of my current holdings.  Selling at strength, to protect and to realize profits.  If ever the index breaks that range resistance, then I'm definitely putting up all of my other cash into BDO's Equity fund. :D

On the weekly charts, AT seems to be this week's top pick due to the BUY signal generated from its MACD oscillator.  Its immediate RST at 18.2 may be hurdled upon for a breakout.  Not to be outdone by the mining trio, PX/LC/MA which had gained a lot these past few weeks,  AT has a story of its own in the name of the Berong Nickel mines.

May 2011 Performance

I'm getting the hang of using excel and so I hope that my posts and record-keeping will be more organized.  I had 14 trades for the month of May, quite a lot for a month I guess.  Well, I really had the time to trade since it's our summer break.

Month to month performance:

Equity rose by 6%.  

1.68% of it were realized through cash.

For what matters most is my YTD (Year to Date) Performance in which I reinvested all my gains from last year:

Realized gains is at 2.88%.

Equity at 2.76%.

--> Equity percentage being lower than the realized gain, means that my portfolio is a bit down due to the currently sideways market.

Composition of stocks

AP	21.0%	-2.38%
FDC	13.0%	-1.61%
TA	9.7%	-14.86%	SRO shares not yet included which would reduce the loss.
LC	9.1%	6.13%
PX	8.9%	-0.94%
URC	8.8%	14.42%	Gains from Cash dividends yet to be recognized
AT	6.8%	1.19%
LPZ	6.5%	-2.24%
SCC	3.4%	-4.43%	Gains from Cash dividends yet to be recognized
Exposure	87.1%

 

 Remaining 12.9% is Cash which is pretty much standard for me as this is the allocated portion for my "revolving fund".  The colored figures on the right is the actual standing of my holdings, whether it is up or on the negative.

The next table shows my exposure with respect to industry.

Power	24.4%
AP	21%
SCC	3.4%
Oil	9.7%
TA	9.7%
Mining	24.8%
LC	9.1%
PX	8.9%
AT	6.8%
Holdings	19.4%
FDC	13.0%
LPZ	6.5%
Commodities
URC	8.8%

  Shows that I am now a bit heavy on Mining and Power which when combined takes half of my portfolio.  I was able to get out of certain stocks which I held for a long time.  Most of my current stocks are relatively new ones, and that explains why most are in the red -- due to slight correction.  I got shaked out of EDC, which was one of my core stocks.  Unfortunately for me, it was just a bear trap when it touched 6.3s going back up to as high as 6.8.

I can say I am more confident with my portfolio as compared to before.  All thanks to technical analysis and some trend following pointers I have learned.  Looking forward to the coming days!

Picks of the Week [May 30-June 3]

My choices for last week were BEL and AT.  However, due to the general slump of last week's index these 2 stocks also followed in the decrease of stock prices.  BEL for last week was more of a "cautious buy" since there have been no breakouts yet.  During the first 2 days of trading, prices went back to support level; thus, no buy orders were made.

As for AT, I made a mistake interpreting the chart.  My labeling of a "bullish flag" was incorrect, and should have just been a range trade.  As a result, I entered at a slight high of 17.70, instead of just waiting at a lower price near 17.21.  Good thing I entered with just a small position.

For this week, I only have 1 pick and it is PX.  With the upcoming stock dividend in terms of new PPC (Philex Petroleum) shares and a breakout for a new high w/ volume, this is definitely a top pick for me.  I entered with a small position because I felt I was a bit late, even buying at the close.  I guess that's the price to pay with holding a lot of stocks (more or less 10), gives difficulty in terms of monitoring.  Since this is a strong buy for me, I am still waiting for dips near 20.  I just saw the 10 year chart and wow, in hindsight, PX has been a very good investment through the years!

For this week, I tried using the weekly charts instead of just the dailies.  This would be a great exercise for me to not only be dependent on daily charts.  Besides, if I am going to speculate for 1 week, it makes more sense to use the weeklies.

And since I had some sort of trouble monitoring all my current holdings plus waiting for "promising" stocks, this time around, I'll just concentrate first with what I already have.

SELL
EDC- sell on strength.  slower upward channel after breaking UT. RST at 7.17 but might fall down to 5.67. [sell at 6.52 or 6.38]
SCC - correction- downward channel .  sell at RST at 222.26 or at least 214.11. Possible to go down further

HOLD
AP- downward channel to sideways since Nov 10. Range trade SPT at 25.86, lighten at 32.7.  Major SPT at 23.45 (130SMA). 
FDC- major RST at 7.7 (old high). UT still intact and in line with 130SMA.  Start buying if it reaches at least 4.8.  Weak DMI (+)
URC- potential cup and handle. major RST at 46.9 (high). SPT at 65 SMA at 37.79.

Strong BUY
LC- strong DMI (+).  cautiously buy at .78 (dips).  SPT at .74; RST at .93
PX - strong DMI (+).  breakout from new high.  buy near 20 SPT.

Cautious BUY
AT - sideways to up.  R1: 17.68; R2: 20.17.  major SPT at 14.86.  wait for breakout to buy (hammer and buy MACD signal). 
LPZ - UT intact.  retesting major RST 6.6. DMI gaining strength (+).  trend line SPT at 5.61. start to buy at 6.2 to 5.99
TA- must hold 1.05 SPT.  sideways from 1.05 to 1.38.  wait further for a bounce before buying near 1.05


On Monday, TA Stock Rights offer at Php1 will be given. 

Picks of the Week [May 23-27]

A review on last week's picks:
1.) CEB - maintained its support at 93.77 and is still slowly going up.  I did not pursue getting in since I am not yet comfortable with the fundamentals of the airline industry.  Yet, out of the picks last week, this is the only stock that remained true to its promise (technically).
2.) JGS- Despite breaking out from its previous high, this stock formed a bull trap instead of moving up.  A bit strange since CEB and URC have been performing well recently.  There might be news that I am not aware of.  I saw weakness since the start of the week; thus, did not pursue in getting in.  Now it's back at gaining momentum in order to break the same resistance.
3.) ELI - It's really hard to apply technical analysis on a speculative stock, especially with weak/erratic volume.  Breakout was a failure as prices went back into range trading.

Maybe next time, I should study the weekly charts instead of the dailies for my Picks of the Week.


Picks of the Week [May 23-27] - still using daily charts though

1.) BEL - Crossed the MACD zero line having a minor breakout and with considerable volume.  Support at 5.6 and Resistance at 6.1.  Possible range trading for now.  A breakout from resistance would be a strong Buy.  BEL has been consolidating since the start of the year after soaring along with LR for its casino play.  There had been a delay with their plans which resulted to this sideway trend.  Seems like the jockeys are in play.

2.) AT - The trading halt of the trio PX/LC/MA last May 11 gave AT some chance to absorb the greed of those who wanted to enter Mining.  As trading resumed for the 3 stocks, AT remained to gain momentum for at least 3 days before having some slight correction.   AT has broken out from its downward trend and has formed a bullish flag with a long pole.  Seems like AT is now catching up with its peers after being a laggard for months.