June - July 2012

This may serve as my June and July update since I have been busy at work lately and I don't think I can religiously update this blog regularly (at least bi-monthly).  It is unfortunate that I got busy the same time when the market has corrected, and that I can no longer keep up with the daily monitoring that I got used to for the last 2 years.

ScIoN Fund (mid-long term)

YTD:  +4.28%

Benchmark: +18.5%

The start of the year was great since I was able to outperform the index; however, during the correction last May, I realized that my stops were too low (100 MA) as my paper profits went back to almost zero.    PSE market is still quite shaky these days as I am trying to re-enter.  My portfolio above shows a lot of entries because most of them are test buys.  Only FGEN and CMT seem to show a continuity on its uptrend.

Currently, my portfolio is clearly underperforming; I hope, I can manage to steer it back to beat the benchmark.  Still, the good thing is it is still on the positive.

AJC Fund (short term fund)

YTD (3 months):  -2.59%

Benchmark: -0.70%

AJC Fund is still on the negative although the gap from the benchmark is closer (< 3%) now  than what was last reported (~ 5%).  Both portfolios suffered from the inclusion of Lepanto which backfired when the Mining EO signed by PNoy still gave uncertainty to the mining sector.  

PSE Index Weekly

Looking at the PSEi weekly chart, seems like it is on a positive channel uptrend.  However, note the divergence as revealed in the MACD.  This may indicate that the uptrend is not sustainable; we can expect further consolidation in the future.  Seems like our market will trade at a range for the meantime. Next month would be the so-called ghost month, so it is possible that we may experience further selldowns.  Might be best to stay at the sidelines for now.

Spotlight: GMA Network Inc (GMA7)

Business Overview:

GMA Network, Inc. is a free-to-air broadcasting company principally engaged in television and radio broadcasting, the production of programs for domestic and international audiences, and other related businesses. The Company derives the majority of its revenues from advertising related to television broadcasting.

In 2011, GMA Network, Inc. grabbed and maintained leadership in nationwide TV ratings.  GMA Network garnered a nationwide average household audience share of 34.2%, up by 3.1 percentage points over its nearest competitor. GMA likewise maintained its TV ratings dominance in its traditional bailiwick areas of Mega Manila and Urban Luzon in 2011. The Network, its programs and personalities also reaped various local and international awards within the year. (source: AR2011)

Some notable subsidiaries:

GMA News Media, Inc (100%) - Converging Technology

Citynet Network Marketing and Productions, Inc (100%) - Television entertainment production

GMA Network Films (100%) - Film production (i.e. Temptation Island, The Road, Panday 2, etc.)

GMA Records (100%) - Music recording, publishing and video distribution

Affiliates

INQ7 Interactive, Inc (50%) - partnership with Inquirer.  INQ7 ceased operations in 2007.  

Philippine Entertainment Portal, Inc (PEP) (50%) - www.pep.ph , indirect ownership via GNMI.

X-Play Online Games, Inc (50%) - partnership between IPVG and GMA News Media for online gaming business.  **Asset Held for a sale

Mont-Aire Realty and Development Corp. (49%) - Real Estate holding company  **subject to sale

Cash Dividend Policy: 

Minimum 50% of prior year's net income (subject to approval of the Board, in consideration of factors in the implementation of business plans).

Net income attributable to Preferred shareholders is 30% of prior year's net income. (historical)  Participating preferred gets 1/5 of the dividend paid to common shareholders.  Convertible to common with a 5:1 ratio.

Top 3 major individual stockholders 

In the 1974, when former President Ferdinand Marcos declared Martial Law and banned foreigners from owning media outlets, Stewart and the American Broadcasting Company were forced to cede their shares to the triumvirate of Gilberto Duavit, Sr., Menardo Jimenez and Felipe Gozon. (source: wikipilipinas)

1.) Felipe Gozon - Chairman and CEO since 2000
2.) Gilberto Duavit Jr. - President and COO
3.) Menardo Jimenez - former President and CEO of GMA7 until giving up the position to his brother-in-law, Felipe Gozon in 2000.  A director of Unicapital, Inc, among all other businesses.

(L-R: Felipe Gozon, Gilberto Duavit Jr)

Quick Numbers:

Fundamentals

Book Value of Equity (AR 2011): ~Php9.8B

Outstanding Shares: ~3.36B
Preferred Shares: 7.5B

BV/share: Php 2.92


Debt Ratio (Long term): 0%
Beta: 0.71
Cost of Capital: 9.7%


Net Income:                 Dividends:
2011:  Php1.72B          2.19B
2010: Php 2.82B          3.4B
2009: Php 2.82B          1.69B


Assuming conservative growth, fair value for the company based on earnings (DCF analysis) would be around:


Fair Value/share: Php12.68


As of 5/4/12, GMA7 closed at 10.06.  Rumors has it that Manny Pangilinan is interested to buy GMA7, to add on his media war chest.   Considering our estimated fair value of 12.68, we still have a potential upside of  +26%.

Risk of Dilution

Due to recent news on MVP's interest on GMA7, there is a risk of dilution when all preferred shares are to be converted into common shares, further diluting ownership on the firm.  7.5B preferred shares translates to 1.5B common shares.  With this assumption, fair value may go down to just 8.77 per share.
Another point of concern is the issuance of dividends which have been greater than net income.
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Technicals:

After a very long consolidation, trading on a tight range for more than 3 years, GMA7 picked up investors' interest at the start of the year, probably on rumors of a buyout from MVP.  Major resistance can be seen at 10 as prices corrected back down on April.  News on the talks gave rise to the stock at the end of the month, making a bullish move which led to a piercing of the resistance line.


A zero cross on the MACD chart supported by more than the average trading volume tells us that the uptrend may still continue further.  Perhaps further consolidation may be observed, which can be supported at the 10.0 line.

PD:  I have positioned myself, buying shares at 10.  Given a favorable valuation based on its earnings, this can be a conviction buy for me.  However, there may still be risks involved such as a possible private placement by MVP, or a dilution of shares when all preferred shares would be converted into commons (~1.5B new common shares).

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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. 

April 2012

ScIoN Fund (mid-long term)

YTD:  +21.43%

Benchmark: +18.3%

Much of this month's gains came from the liquidation of TA upon touching the 200MA @1.21.  TA remains to be an undervalued stock; however, there is still the SRO overhang which discourages some investors to go in, at least until ex-date.  We remain bullish with MARC for its Nickel trades; especially since Indonesia has started banning their Nickel exports.

BDO has also been let go after its SRO announcement.  Prices plummeted the day after the announcement, as stockholders would need to lighten their BDO shares if they still want to maintain the same exposure.

FDC enjoyed some push coming from its subsidiary's IPO (East West Bank).  The stock's price went up as high as 5.19, or +10.66% from last month's close.  We shall wait for further price action when EWB would finally go public this May after being oversubscribed 3x.

PAX is a bit of a disappointment since we are having paper losses from this stock.  Hopefully prices would pick up once again this May after waiting for disclosures regarding the supposed huge cash it got from selling of a subsidiary.

We now maintain cash close to 40% of the total portfolio.  It's summer season once again, and some believe in "Sell in May and go away".  Perhaps traders go into a vacation, leaving behind a low volume market susceptible to volatile prices with a selling bias.  It's high time for early leaders to take a breather; thus, an opportunity for a buy when prices dip.

AJC Fund (short term fund)

YTD (3 months):  +0.24%

Benchmark: +5.64%

This fund is still lagging behind since MPI (benchmark stock) continued its strong push.  Out of all the trades this month, only FDC provided a respectable gain, enough to offset some losses.  Largest allocation goes to PAX; however, the stock underperformed this month.  Its fundamentals remain to be strong, but has weak positive momentum.  Hopefully, the other stocks would compensate and help push next month's trading gains.

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. 

Spotlight: Vista Land & Lifescapes Inc. (VLL)

Business Overview:

This is an investment holding company of Senator Manny Villar, which concentrates mostly on Philippine Real Estate businesses.  VLL serves as the parent company to the following subsidiaries:

Brittany Corporation (100%) - Luxury houses for the high end market segment (Php9M++) in Mega Manila.  e.g. Portofino, Crosswinds, La Posada, Mosaic and Avant.

Crown Asia Properties (100%) - Middle market housing segment (Php3.5M-Php9M) in Mega Manila.  e.g. Citta Italia, Maia Alta, and Ponticelli.

Camella Homes (100%) - low cost (below Php1.3M) and affordable housing segment (Php1.3M-Php3.5M) in Mega Manila.  e.g. Tierra Nevada, Nova Romania, Cerritos, Pacific Residences, and Trevi Towers.

Communities Philippines formerly known as Crown Communities (100%) - residential properties outside MM; from low-cost to middle market segments. e.g. Savannah (Iloilo), Plantacion Meridienne (Batangas), Solariega (Davao), Frontera (Cagayan De Oro), Azienda Milan (Cebu), and Wedgewood (Pangasinan).

Vista Residences (100%) - Residential high-rise condominium projects across the Philippines.

Manny Villar started out this family business focusing on low cost housing (large-scale production) and initiated selling through house & lot packages.  Their business is now divided into different market segments and also involves vertical projects (condominiums).

Quick Numbers:

Fundamentals

Book Value of Equity (AR 2011): ~Php40.6B

Outstanding Shares: ~8.54B

BV/share: Php 4.77

Debt Ratio: 22%
Beta: 1.08

Net Income:
2011:  Php3.5B
2010: Php 3.0B
2009: Php 2.3B

Assuming conservative growth, fair value for the company based on earnings (DCF analysis) would be around:

Fair Value/share: Php5.32


As of 4/13/12, VLL closed at 4.3 which is still below book value.  Considering our estimated fair value of 5.32, we still have a potential upside of  +24%

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Technicals:

 Last thursday (April 12), price broke out from its consolidating range (Darvas Box), and is supported with good volume.  MACD indicator also shows signal for another uptrend, forming a higher low.  Creating a bullish flag pattern, next target would be around 4.7 which is close to book value.  However, RSI indicator signals that prices are on overbought conditions (due to its parabolic rise); but given the other bullish indicators, prices would have to consolidate a bit for a while before its next big push upwards.  At current price of 4.3, it is still halfway through initial BV target, so it's a possible Buy on Dips.

PD:  I wasn't able to buy due to my low bids.  Prices last Friday went straight up.  Will wait for further retracements, if ever given the chance.

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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: Alliance Global Group, Inc (AGI)

Business Overview:

AGI started out as a glass manufacturer before becoming a holding company, diversifying its business into 3 segments:  Real Estate, Food and Beverage, and Quick Service Restaurant Business.  Below are some of the subsidiaries under these business segments:

Real Estate (AGI interest): 

Megaworld Corporation  (57%) - publicly listed MEG
Global-Estate Resort (61%) - publicly listed GERI
Richmonde Hotel Group (57%)
Eastwood Cyber One (57%)
Empire East (33%) - publicly listed ELI

Food and Beverage (AGI interest):

Emperador Distillers, Inc (100%) - product:  Emperador Brandy
The Bar Beverages (100%) - product: The Bar
Alliance Global Brands (100%) - owns the foreign subsidiary handling Piknik potato snack products.

Quick Service Restaurants:

Golden Arches Development Corporation (49%) - operations and franchising of McDonalds in the Philippines.

AGI is owned and managed by Andrew Tan, counted among the top billionaires in the country.
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Quick Numbers:

Fundamentals:

Book Value of Equity (3Q 2011): ~ Php 122B**
Outstanding Shares: ~10.3B

BV/share: Php 11.90/share

Debt Ratio: 25%
Beta: 1.28

Net Income:
2011:  Php16B
2010: Php 7.5B

Assuming conservative growth, fair value for the company mainly based on earnings using DCF analysis would be :
Fair Value/share: Php18.4 


As of 4/4/12, AGI's market price is at 12.22/share which is already a little above its book value; however, considering conservative growth (sustainable and long-term), it still has a potential upside of 51% towards FV.

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Technicals:

AGI has corrected back down after teasing to break 13.04 (major resistance - previous high since Dec 2010).  The company's stock price has just been moving sideways ever since. A short term uptrend can be seen starting Oct 2011 (Green line).  50 day moving average (blue line) may stand as support while its MACD will try to form a higher low, bouncing back up hoping to finally break out from its more than 1 year resistance line.


** Special thanks to gunther of FM for pointing out that I was using Total Assets and not Shareholders' Equity as the book value.  I edited this post to modify the book value computations.
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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. 

March 2012

ScIoN Fund (mid-long term)

YTD:  +18.20%
Benchmark: +16.2%

March was a generally good trading month for me since my portfolio increased for another 6% in just 2 weeks.  I was able to realize gains from ANI, TEL and PXP.  TA cash dividends has also arrived.  Biggest portfolio movers maintain to be FDC and MARC.  However, on the latter part of the month, MARC had a big correction going down to 3.  I'm currently 2% above my benchmark, so I'm happy with my first quarter performance so far.

I'm still bullish for our local market; however, I'm waiting for another correction of the market.  Index was able to maintain the positive trend channel which started January this year.  But, comparing it with the MACD indicator, there seems to be a negative divergence.  The ScIoN fund is currently 21% cash, so if ever there would be a major dip, I'd have enough ammo to buy.


AJC Fund (short term fund)
YTD (2 months):  -0.68%
Benchmark: +4.4%

The AJC Fund reached its all-time high of a +4.17% mid-March thanks to MARC (High of 3.52); however, as mentioned earlier, it went back down to 3. Since the portfolio is less diversified as compared to the ScIoN fund, volatility is higher at this point. I exited MARC at 3 with a gain of around 8%.  Last month's losses (-2.97%) were recovered and now, portfolio is at a near break-even (-0.68%). 


The challenge here is to beat the benchmark portfolio.  It includes EDC, BEL and MPI which were big gainers for March; thus, having a good run this month (4.4%).  I had entered AGI; however, price movement turned out to be a bull trap.  I'm having Cash ready at 70%, waiting to jump in when the market corrects.