Philippine Stock Market And Related Topics

moving to investmentphilippines.com

2011-04-25T01:54:00.000-07:00

After a hiatus, I have finally created a better website wherein I can share my opinions and knowledge about finance. I'm moving this blog to investmentphilippines.com.

This blog will cover topics about stocks, mutual funds, UITF, real estates, business and franchising, personal finance and other related topics about investing in the Philippines.

The main reason that I have created this site is to widen my horizon in the world of finances by studying about the various topic while sharing it with my reader. Hope you will like my new blog and learn from it...see you there!

The Effect of Interest Rate Hike to Philippine Stocks

2011-03-24T16:50:00.000-07:00

Interest rate hike, the monster in every investor's cabinet, was finally started yesterday as announced by Bangko Sentral ng Pilipinas. An increase of 25 BSP(basis point) or 0.25% was implemented. So are we expecting another panic in the stock market now?

Some of my friends were asking me what will possibly happen after this. Well, some people will sell, that is for sure, and it is normal with or without interest rate hike. Interest rate, though surely has a negative effect on the stock price, is only one factor. It's effect can be complex though sometimes negligible specially if you are a long term investor.

There are many theories about how interest rate affect the stock market and the economy as a whole. A high interest rate will lower the liquidity of money in the market and thus will curtail consumption. Lower consumption means bad for the economy though I don't fully believe in the Hyperspending Theory of the Western because in order to accumulate wealth, one must practice frugality like what China did.

Borrowing money is of course will be more expensive because of higher interest rate. In effect, companies who borrowed and will borrow money will have to pay a higher interest expenses and thus will reduce its profitability. Those companies with high debt to equity ratio and who will need to raise capital will be surely affected.

However, if you compute for the average Net Profit Margin of all the companies in the PSE index , excluding LC because it is a losing company, the value is 23.32% for 2010(I estimated 4th quarter earnings) and 19.97% for the past 5 years. In addition, the average debt to equity ratio(DE ratio) of these companies for 2010 is only at 70.66. Literature says that DE ratio of less than 100 is a good value, meaning the debt level of a company is not severe. This means that these companies can absorb the effect of the interest rate hike and I'm quite sure that the smart boys/girls of these companies will find a way to make their business profitable even more.

Remember that before the 2008 Financial Crisis, our country's interest rate is at 200 BPS or 2% higher than the 4% and 6% rates during the crisis until yesterday. In short, we should have expected this a long time ago. In my case, I'm not worried because I based my stocks valuation at 10% interest rate which is higher than the pre-crisis level. Of course valuation is a subjective thing and just like Prof Aswath Damodaran of New York University says in one of his lecture in Valuation "every asset has a value but no one can exactly compute it" (I love his lecture by the way).

I maybe wrong in my opinion but who has certain idea anyway? However there's one solution for these uncertainties that we have learned from the late Benjamin Graham and the old Warren Buffet, that is to always put a margin of safety in your investment like buying stocks at 35-50% below your valuation of the price. The lower the purchasing price the better. If stocks tumble down as an effect of interest rate hike panic then it must be a good opportunity to buy.

Stocks 101: The Basic Part 2

2011-03-19T23:39:00.000-07:00

Last time I've already discussed the definition of stocks and the essential rights of a shareholder. For the previous post please click here, Stocks 101: The Basic Part 1.

Note that whenever I mention stocks, I am referring to common stocks only. I will not be touching about the preferred stocks since I'm not investing on it and only a few small time investors have it.

The Stock Market is the place where people can buy and sell stocks. However, you cannot simply march inside the Philippine Stock Market office and demand for acquisition of stocks. You need to have a broker which are the legal middleman in stocks transaction.

Stock Broker
There are 2 types of dealing with your broker, the offline broker and the online broker.

The offline broker are the traditional or old school type wherein you can do transaction over the phone or by visiting the broker's office personally. The cost of transaction for this type is high and so is often use only by big time and institutional investors. The advantage of using an offline broker is you can get some tips and advise from your broker (but this can be a disadvantage as well if your broker is trying to sell promotional stocks...I'll touch on this issue some other time).

The online broker is the latest and modern way to buy stocks. You first open an online trading account from the brokerage company, then you can have an access to a trading platform wherein you can do buy/sell of stocks over the internet. It is quick, fast, and cost effective way to buy and sell stocks. However, using this platform, you need to do all the stock picking on your own.

In the Philippines there are 3 major online platform that I know:
Citiseconline
BPI Trade - under Bank of the Philippine Islands
First Metro Securities Brokerage Corporation - under Metrobank group

In my case, I'm using the BPI Trade platform because of its convenience. It is tied up to my BPI savings account. This account is where I remit my money to the Philippines, transfer funds to my parents for their allowance, pay bills, withdraw cash in the Philippines and abroad, it is linked to my ALFM funds. And the best part is you can open the BPI Trade Account at PhP500 only! Yes, so for you guys out there saying that stocks are only for the rich kids, well you're wrong!

Note that I'm not endorsing the BPI Trade Account or its services but I'm just speaking about my experiences. I'm not sure about the requirements needed for the other platform but you can search on your own by clicking on the link above. For Citiseconline, you can also check this blog post from one my favorite blog: http://learnfinancialeducation.com/how-to-open-a-citiseconline-stock-trading-account/.

Stock Market Vocabulary
I also found the blog below to be very informative about the words/jargons use in the stock market:
http://learnfinancialeducation.com/common-terms-in-stock-market/

You might as well visit the Philippine Stock Exchange website for more information at
http://www.pse.com.ph/

How Much Money Do You Need To Start Trading?
It depends on the brokerage company/platform that you choose. As I have mentioned, I have choose BPI Trade because it requires the least amount of money to open an account which is PhP500. Of course you need to first have a BPI Savings Account. The BPI Direct Savings Account only requires PhP500 initial deposit as well.

Depending on the company/stocks that you wish to buy, the minimum amount of money that you need to start trading will range from PhP 1,000+ to PhP10,000++. For example, FLI or Filinvest Land Inc, you can buy 1000 shares of FLI at PhP 1,122.65 based on last Friday closing price (Mar. 18, 2011)!!! I wish I have learned this things a long time ago, because I use to believe that investment in stocks will require huge capital.

But just a friendly advice, if you have sufficient money, do all your transaction (buying and selling) at minimum of PhP8,100 or less to save on transaction cost. Why? Because there's a fix minimum transaction and anything lower than this will increase the ratio of your transaction expenses to total investment amount. I will explain this on my next post.

For the meantime, keep reading and learning about investment because that is the first step in Smart Investing and Wealth Accumulation.

EDC (Energy Development Corporation), A Tsunami Stock

2011-03-18T23:48:00.000-07:00

Since 2009, I have seen the potential of this company because its business is Power, which is rapidly growing in the Philippines. In fact, next year, the total capacity of the all the power plants is at the critical level due to high power demand. Law of supply and demand will favor the companies in these sector but EDC has more advantage. With the oil price expected to surge up due to Middle East revolution and Japan crisis, EDC will be the least affected since its fuel are renewables (Geothermal, Hydro or Water and they will start the Wind next year).

Below is my e-mail to my friends last month, Feb 17 when EDC stocks is at 5.5+ level.

------------------------------------------------------------------------------------------------------------

From: 조날드
Sent: Thursday, February 17, 2011 8:24 AM
To: (deleted)
Cc: (deleted)
Subject: why I'm buying EDC stocks

I bought a lot of EDC shares last Tuesday for the following reason:

1. My valuation for the said stocks is P7.5 per share while current share is at 5.5 which means the upside is 36%

2. Return of Equity and Net Profit is stellar for the past 5 years.

3. The said company is fast growing due to the higher demand for power… which are expected to increase at higher rate on the next 5 years.

4. It is a very active stocks.

5. There’s a lot of insider buying as shown below:

Date	# Share	Price	Who
2011-01-18	200000	5.99	Senior Vice President
2011-01-20	5000	5.92	Corporate Information Officer
2011-01-25	27100	5.83	Chairman and CEO
2011-01-25	972900	5.83	Chairman and CEO
2011-01-26	375000	5.8	Senior Vice President & Compliance Officer
2011-01-26	281250	5.8	Vice President, Power Generation
2011-01-26	281250	5.8	Vice President, LGPF
2011-01-26	281250	5.8	Vice President, BGPF
2011-01-31	3000	5.79	Corporate Information Officer
2011-02-01	2000	5.7	Corporate Information Officer

This is a total of 2,428,750 with average weighted stock price of 5.83. There are many reasons for insider selling and most of them are to liquidate for personal needs but there’s only 1 reason for insider buying…it means the stock is cheap and profitable in the future.

In addition, starting April this year, FGEN has a call option to buy EDC shares at strike price of 6.19 per share….(12.5% upside from the current price). For my current holdings, I’m expecting a 50% upside since some of my shares were bought at 4.55 level since June last year (now I understand the importance of PATIENCE and LONG TERM INVESTMENT).

Just my 2 cents.

Regards,

조날드

Process Engineer

Offshore & Special Ship Piping Design Team

“A Filipino is pliant like a bamboo. Neither typhoons nor monsoons could break the Filipino spirit; like the bamboo, it sways and bends with nature’s relentless onslaughts, but it refuses to yield or die.”

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One of my friend who also bought shares that time was very happy to informed me that the shares have gone up. I don't check stock prices recently due to my work and studies and I was surprise that indeed the price goes up and with big volumes....a tsunami of EDC stocks....

I also found out that they already release their annual report for 2010 so I will be reading them and share you my analysis soon. As a sweet bonus, they will be giving away dividends at PhP0.16 per common share (EX-DIV 24Mar2011, RECORD DATE 29Mar2011, PAYOUT 22Apr2011). This is 2.54% of the closing price last Friday, Mar 18. Well this is not bad compared to the 0.5% earnings if I keep my money in the savings account, right?

Well, I'm expecting the same will follow for FGEN and FPH since both these companies are related to EDC (they have shares with each other and so they can be considered as one company).

Again, I would like to remind everyone that above were just my opinion based on my analysis of the data. Past Performance is No Guarantee of Future Results and so Invest Wisely.

New and Views: PH and Japan Economy

2011-03-15T16:37:00.000-07:00

PH Economy
For the first time since 1998, our country, the Philippines, have a budget surplus. In short, the government save some money (finally, our government became a role model to all the Filipinos). This is a sign of good governance and if sustainable will be translated to growth. Economic growth means more jobs and more jobs means more money for the common people. Some of these money, hopefully, will be invested to our stock market....Hurray!!!

For complete news, see the link below:
http://www.bworldonline.com/content.php?title=Surplus%20for%20January&id=28077

Japan Economy
Every single day since Friday last week, news about the earthquake and tsunami in Japan are bombarding us nonstop.
In reaction, stocks are starting to plummet and traders were on panic selling and liquidating their shares due to potential nuclear meltdown. Well guess what, it's not yet the end of the world and even if it is do you think you will survive with your cash?

I'm still a newbie in stocks investing but I'm very much aware of the lessons of 2008 Economic Crisis....that is "In every calamity there's an opportunity". With this principle in my mind, I managed to earn big bucks from 2008 Economic Crisis, 2009 Ondoy Typhoon in the Philippines, 2010 Greece/European Debt Crises, and in the most recent 2011 Egyptian Revolution I already posted 15%-20% gain of the stocks I purchased during the sell-off in February.

Besides, Japan has experienced Nuclear disaster already during the World War II and I'm quite sure they can stand on their feet in due time.

Below is a very interesting article about the impact of the recent disaster in Japan
http://tokyo.japantimes.co.jp/post/en/1599/Japan+s+economy+after+the+quake.html

Stocks 101: The Basic Part 1

2011-03-15T15:42:00.000-07:00

It's been a long time since I posted in this blog since I was busy with new projects this year and studies (about Options, Korean stock market and Derivatives). However, I have several friends who occasionally ask me about the stocks basic so I decided to continue this blog.

What is stocks?
Stocks is a piece business own by the shareholders. To understand it, let us take SMPH as an example.
SMPH or SM Prime Holdings is the company that own and operates the SM Malls in the Philippines and China. This company is divided into 13,898,943,067 outstanding shares or stocks. Owning one of these stocks will make you a part owner of those malls...so does it mean I can go to any SM mall and do a shopping spree for free? Or can I demand from the sales lady to prioritize my purchases during the midnight sale since I'm a part owner of SMPH? Dream on...

So what if I own a stock(s)?
First, owning a stock entitles you to be a business owner but not necessarily the controlling owner (Management) unless you own majority of the stocks. The following are your rights as a stockholder:
1. Voting Rights
2. Dividend of Net Income
3. To Sell the Stocks you Own at Your Price
4. The Right to Avail of Stock Rights/Warrants and offerings.

The abovementioned are the basic and important rights of a stockholder.For small investors like me, I think the most important is number 2 and specially number 3. I say it again..."The Privilege to Sell the Stocks you Own at Your Dictated Price". Likewise, for those who want to purchase stocks, they also have the option to buy the price at the price they want. Of course, if someone agreed to your Price, whether Buy or Sell, then we have a Matched and only then the transaction will be finalized.

News and Views: EDC, SPH,

2010-12-28T03:42:00.000-08:00

EDC
Price = 5.78, PE(TTM) = 12.08, ROE (TTM) = 30.40

Due to expected power crisis in the Philippines, EDC announced to improved its power generating capacity.Several projects are already started including the rehabilitation of Bacon-Manito (BacMan) geothermal complex in the Bicol region.

As I have mentioned in my previous post, Christmas Sale at PSE, EDC is one of the big player in the Power and Energy Sector and based on my analysis, its stocks should be price at P8.5 per share. The company's performance are outstanding and are expected to grow further once its projects are completed. In addition, EDC can benefit from the newly open Wholesale Electricity Spot Market in the Visayas region where several of its existing plants are located particularly the geothermal field in Leyte.

click here for the complete news in BusinessWorld

SPH
Price = 2.64, PE(TTM) = 22.92, ROE (TTM) = 2.86
Splash Corp made an announcement about their expected income for the year 2010 to peg at P130.5M, a turn around from its low income of P23.7M(million) in 2009 . However, the expected closing income is still low compared to the net income of P223.6M, P279.3M and P297.7M which they earned in 2006, 2007 and 2008 respectively. The posted low income in 2009 is due to the economic global downturn.

Looking at the operating cash flow of SPH in , there are positive signs of fast recovery and possible growth momentum. Assuming a 15% consistent income growth in 10 years, SPH should be price at 3.1 in 2011.
click here for the complete news in Inquirer

Disclaimer:

The assumptions used above are based only on historical data and doesn't guarantee future performance of the company. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

the Mediocre and the Outstanding in the Mining and Oil (M-O) Sector

2010-12-26T04:42:00.000-08:00

I was reading one of the blog about the Philippine stocks when I noticed the post he/she made on Dec. 22 about the most recent movements in the Mining Sector of the PSE particularly AT, PX, NIKL, LC and ORE. I wonder if I missed anything about these securities that's why I made a review of their business performance. Below is the summary:

The Outstanding
SCC - Semirara Mining Corporation's income jumped 146% for the first 9 months of 2010. The said improvement is mainly due to its power business (I have repeatedly mentioned that this is a fast growing sector in the Philippines). Prior to this year, SCC is consistent in earning a high income and thus resulted to the rally in its stock price for the last 2 years. More developments are expected for the said company since new projects are expected to roll in the next few years as a respond to the growing demand in energy.

PX- Philex Mining Corporation's income increased at 35% from Jan-Nov this year. This is expected due to rising metal prices, bigger production and higher ore grades. The company announced earlier that they will jack-up their CAPEX next year to develop new mines next year. In my assesstment, PX is number 3 in my stocks wish list. It has a consistent high income for the last 5 years and expected to continue in the future. If I'm not mistaken, MVP bought stakes at this company at P21/share.

The Mediocre
OM, CPM, MA, ORE, LC, AT, NI and GEO are some of the "Basura" stocks in PSE. I really don't understand why people are still buying these stocks when it was consistently losing money. LC even issued stock rights recently perhaps to extend the life of the company. Maybe I'm wrong but their financial statements for the last 5 years are clear indication that these stocks are highly risky. Stocks are as good as the business it represents and common sense tells me that their negative income means that I should avoid these stocks like plague.

The Not So Sure
OV and OPM made a turn around in their performance this year but I will see if this is sustainable.
NIKL is just a newly listed company and I don't have enough data to gauge its value but its recent performance makes it a candidate...maybe.
PERC's historical performance is a so-so, but with its entry in the Power Industry, there's a chance that it may perform well in the future just like what happen to SCC.

Legend:
ROE - Return on Equity
TTM- Trailing 12 Months
ROE-5 -average ROE for the last 5 years
ROA-5-average Return on Assets for the last 5 years
NPM - Net profit margin (TTM)
PE-TTM - Price to Earnings Ratio based on the most recent earnings and Price(Dec. 23).

News and Views: AP, CEB, COAT

2010-12-21T14:51:00.000-08:00

AP
Price = 31.75, PE(TTM) = 12.77, ROE (TTM) = 21.66
The National Irrigation Administration gave the go signal to Aboitiz Power AP) to perform the feasibility study for the expansion of Magat hydroelectric power plant in Isabela.

This is just one of the project being pursued by AP as a response to the fast growing demand of our country. As I have said in my previous post, "Christmas Sale at PSE", AP stock price is still expected to go up in the next 2-3years. My valuation for the said stocks is at Php48-55.

click here for the complete news in BusinessWorld
click here for the complete news in Inquirer

CEB
Price = 106.30, PE(TTM) = 10.69, ROE (TTM) = no data
JG Summit is buying shares of Cebu Pacific (CEB) after the shares stumble down from its IPO price of Php125 to its current price of Php106.30. The said decline was the market's reaction to the announcement that Air Asia and Tiger Airways will enter the local market which will create a stiff competition with our local carriers.

Even with the said move, I'm still not entice with CEB since I'm well aware of the notorious price competition in the airline industry. I'm a frequent flyer and I always choose the cheapest fare regardless of the airline. As the competitor increases, the fare price decreases and so is the profit margin. With this reason, I consider airline stocks as a risky long term investment. I will leave this stocks to the speculators and gamblers and put my money in a stocks with more room for growth or with the companies with long history of consistent profit.
click here for the complete news in Inquirer

COAT
Price = 2.42, PE(TTM) = 6.48, ROE-5 = 12.32
Chemrez Technologies Inc., had expressed interest in acquiring the formula which will solve the crown rot problem in bananas. The said formula was developed by The Philippine Center for Post-Harvest Development and Mechanization (PhilMech).

This is an additional product with high profit potential for COAT should they became successful in mass producing this solution. Banana is one of our leading export product thus created a demand for this solution.
click here for the complete news in BusinessWorld

Legend:

ROE-5- is the 5 year average Return of Equity.

PE (TTM)- is the price to earnings ratio of the stocks based on the earnings in the most recent trailing twelve months(TTM) while price is base on previous days closing price.

News and Views: TEL, EG, MEG, MER, PERC

2010-12-20T16:50:00.000-08:00

TEL, EG
TEL: ROE-5 = 39.86, PE(TTM) = 10.98
EG: ROE-5 = - , PE(TTM) = -
ePLDT, a company owned by PLDT(TEL), sold its 75% stake in the operator of the Netopia Internet cafes to IF E-Game Ventures Inc. (EG). ePLDT's serviced revenue decreases by 1% to 7.9 billion from January to Septermber this year.

In my opinion, the moved was a win-win for both parties. ePLDT can now focus its resources on its core business which is more profitable while the Netopia Internet franchise will complement EG's business. IP E-Game Ventures Inc. (EG) is engage primarily in the business of interactive gaming and content distribution.

click here for the complete news in BusinessWorld

MEG
MEG: ROE-5 = 9.31, PE(TTM) = 12.32
Megaworld Group which is composed of Megaworld Corporation (MEG), Empire East Land Holdings, Inc.(ELI), and Suntrust Home Developers, Inc.(SUN) through its associate, Suntrust Properties Inc., is planning to build and sell 18, 673 residential units with total floor area of 830,000 sq.m. next year(2011).

This is apart from the projects that are expected to be completed next year. MEG will complete its office and retail spaces for BPO (call centers) at McKinley Hill, Newport City, Iloilo and Cebu City. ELI launched 5 new projects in Metro Manila and Laguna.

Megaworld Groups' plan is in-line with the expected rise in the real estate business. Also, the increasing buying power of the OFWs and expats going to the Philippines for cheaper living plus the booming business process outsourcing will further increase the demand for office and residential space.
click here for the complete news in BusinessWorld
click here for the complete news in Inquirer

MER
MER: ROE-5 = 11.19, PE(TTM) = 23.71
Manila Electric Company will issue Php5 billion worth of fixed-rate notes to pay its debt and other requirements(capital expenditures). Last month, MER also issued another Php4.8 billion notes also for paying its debt. The company has earlier announced that their planning to build up to 1,500 MW of capacity that will comprise both of peaking an baseload powerplants.

Looking at the last quarter's debt to equity(DE) ratio of 35, this shows that MER has more room for leveraging. the Php5 billion plus the Php 4.8 billion will increase its DE ratio to 43.7 which is still low compared to standard of 100. Their plans to engage in power generation caught my attention since the demand of Power in the Philippines is fast growing and this might increase the value of the said stocks. I'll post a valuation of the said company in the very near future.
click here for the complete news in ABS-CBN
click here for the complete new in Manila Bulletin

PERC
PERC: ROE-5 = 9.97, PE(TTM) = 15.00
PetroEnergy Resouces Corp. (PERC) is planning to build the 20MW geothermal power plant in Mt. Makiling. The geothermal plant will development will be undertake by the Maibarara Geothermal Inc.and will spend around Php100 million for the exploration. PERC, whose business includes providing services to companies exploring oil in the Philippines and Gabon, Africa, have started to involve in power generation business since Sept last year. The new development will entitled the company to tax perks (7 year income tax free) as stated in the Renewable Act of 2008.

PERC is another rising player in the growing arena of Power and Energy sector. Though past performance of the said company is not spectacular, I will sure follow this in the future should potential for growth in value materialized.
click here for the complete new in Inquirer

Legend:
ROE-5- is the 5 year average Return of Equity.
PE (TTM)- is the price to earnings ratio of the stocks based on the earnings in the most recent trailing twelve months(TTM) while price is base on previous days closing price.

Important Announcement

2010-12-20T02:28:00.000-08:00

I was advised by my friend, who happens to be a lawyer, to remove and refrain from copying news from other source because I might face legal issues in the future. I thought there's no copyright issue about copying news since it is a common practice in the web and blogosphere. My intention was just to gather information about the listed companies in the PSE however in order to avoid being sued I will try to figure out how to present this information gathered in a clean and legal way. I'm looking at the possibility of News Aggregation but I will still need to check if there's no loopholes in the said practice since the said activity was a hot issue in the US. For the meantime I will just post weekly review of stocks and opinions on about the happenings in the PSE.

Stocks in Focus: Alaska Milk Corporation (AMC)

2010-12-19T04:47:00.000-08:00

Alaska Milk Corporation (AMC) is a leading manufacturer of milk products in the Philippines. It began its corporate life in 1972 and became a publicly listed company in the PSE in 1995. In 2007, AMC became even more dominant in the liquid milk category by acquiring/licensing the liquid canned products of Nestle S.A., which includes Carnation, Milkmaid, Alpine, Liberty and Krem Top brands.

wala pa ring tatalo sa Alaska!

Economic Moat:

Alaska Brand is one of the leading Milk brand in the Philippines. It’s greatest rival is Nestle S.A. with similar product lines like Bear Brand and Nido. Despite the competition, AMC manage to keep a big part in the overall market share of the Milk products specially the liquid milk products for 35 years. In addition, some of the milk brands that are originally owned by Nestle S.A. was acquired by AMC since 2007 complementing their business thus resulting to improved operation margin, better supply management and improving their sales as a whole.

Business review:
AMC has consistent increased in sales, net income and operating cash flow as shown in the charts below.

Profitability:
Average ROE for 5 years = 17.57
ROE (TTM or trailing 12 months) = 36.92
Net Profit Margin = 16.39

AMC management is doing an excellent work in making its business profitable and consistently improving. ROE higher than 15 is a sign of a profitable business. Note that the 5 year average of all the companies in PSEi is only 16.06 thus making AMC above average. The net profit margin of AMC is also improving (16.39) compared to industry average of 5.20. In addition, the expected appreciation of peso in the near future will further increase the profit margin since raw materials are imported.

Growth:
Annual Net Income growth rate = 24.13% (for the last 7 years)
Sustainable growth rate = 33.36%

In a country where birth rate is one of the highest in the world, the best profession is midwifery and the best product to sell is obviously Milk. Combine this fact with the efficient production line of AMC thus making the business grow faster over time. Acquiring the products previously owned by Nestle S.A. is a very good step by the company since these brand has its own share of loyal consumers (I’ve known Alpine, Carnation and Liberty since I’m young) plus it optimize the production, CAPEX and overhead expenses since all this product complement each other (same raw materials and almost same production lines and machines). Its sustainable growth rate is also high and overleveraging is highly unlikely. The sustainable growth rate is the maximum growth rate that a firm can sustain without having to borrow money.

Risk and Debt:
DE Ratio = 9.94 (Debt to Equity)
Current Ratio = 1.84

Should another round of financial crisis happen in the near future, I bet this company will survive since its debt is almost negligible. Based on all the books and experts, a DE ratio of 100 or less is good...AMC has 9.94! In fact the only time that this company borrowed in the bond market is when they acquire the legendary brands from Nestle and still this level is very low. PSEi stocks has average DE ratio of 66.10 (and so it means these companies are financially strong...hurray!). Liquidity is also better than average since its current ratio (current asset/current liabilities) is above 1.5....

Valuation:
PE ratio = 5.12 (2010 estimate)
PB ratio (MRQ-most recent quarter) = 2.71
Intrinsic Value = Php 25 per share
Current Price = 13.18
Upside = 89.70%

Intrinsic value of AMC is calculated based on the latest quarterly report(3Q-2010). Cash flow is projected to grow at 15% for the next 10 years and then discounted at a rate of 10%. The computation is very conservative since I don’t consider the other future income after 2020.

Other Factors:

AMC is scheduled to give dividend on Mar 01, 2011 (ex date) and this company is very generous to its shareholder this year after giving a total of Php0.425 per share. Currently, its price show a strong support at 13.0.

Conclusion:

AMC is a good value stocks specially if you have long term outlook since it usually give high dividend to its shareholders. It has more upside in the future with low risk due to its financial strength.

Disclaimer:

Christmas Sale at PSE

2010-12-14T21:15:00.000-08:00

It's 16 days before the end of 2010 and so I have started balancing my assets and portfolio. I have realized that I have surplus cash in my trading account (thanks to the bull run last Oct) and so I'm planning to pull it out and put it in my Bond Funds by mid January next year. I normally check stock price every end of the day and when I check last night, I found that there are some stocks which can be a potential investment and so I decided to postpone my exercise schedule today to observe the market and buy if opportunity comes....it did and a lot....and so I made my own version of Christmas shopping...

SMPH

SMPH is one of my favorite stocks in PSE since it has a long history of growing profits and it has the business franchise value or durable competitive advantage that Warren Buffet loves. In my valuation last year, SMPH's intrinsic value for 2010 is 12-13 and with sustainable growth rate of at least 9% for the next 10 years base on the current payout ratio and 5-year average ROE.So while many other Filipinos will shop for the holidays, I bought SMPH stocks at Php10.80 today and plan to sell it once the new mall in Cebu started its operations....

I wanted to buy this stock ever since but for some reason my attention is always caught by FPH (which is my biggest bet in my portfolio....I will make a post about this soon). It has a good ROE and a big player in the rapid growing sector in the Philippines...the Power and Energy Sector. The profit margin is also attractive and whether we like it or not we need to buy their electricity. Some people might think that AP has reached its maximum value but based on my analysis...its a yes and no....yes if you consider only the current capacity...but if you can estimate the expansion and put it in the valuation it still has long way to go. I'm expecting a value of 48-55 for this stocks....So, as a Christmas present for myself, I bought it at Php32.5...

EDC

I started buying this stock since 3.8++. Then sold some it its last run at Php6.25-6.53 (but I only sold half of my holdings). Same reason with AP, but with additional advantage, this Power company focus on renewable energy...the energy of the future. For this reason that it has the advantage of securing additional finances for expansion and tax perks (I bet you don't know these...). If you review the call option made by FGEN (see my post: http://pinoysmart.blogspot.com/2010/12/history-this-is-important-reference-for.html), the exercise price is Php 5.67 for Apr2010-Apr2011, Php 6.19 for Apr2011-Apr2012 and 6.76 for Apr2012-Apr2013. However, with my valuation assuming a 15% growth for the next 10 years, I'm expecting to sell it at minimum Php8.5 between 2012 and 2013.

...and there's a lot more like FPH, SPC, LPZ, AMC and etc at discounted price. Some people who are shortsighted thinks that the current market is already Overbought but if you check the value of each companies, you can find the best buys at PSE....

Note that I'm not a day trader and I buy more than sell because I plan to invest in a long term.

Disclaimer: Above-mentioned is only my personal opinion and base on valuation at my own assumptions.

San Miguel Corportation....a Big Bull on the run

2010-12-12T16:09:00.000-08:00

I’ve been observing San Miguel Corp., lately and I must say that this company is a good buy especially now that its momentum has picked up. The Management moves of selling existing stable business and buying into fast growing stocks makes its ROE seems low and scare away many investors (or should I say traders). But looking in depth at its financial statement, the company has a healthy balance sheet and will surely grow fast in the next 10 years. It has a low to medium leverage withdebt to equity ratio, or DE ratio (a valuation to test the debt level of a company) is 72.74%. Assuming a 20% annual growth for the next 10 years, SMC stock price intrinsic value is at PhP196 by discounted cash flow calculation. I’m expecting a 50% upside for this stocks.

Welcome to Philippine S.M.A.R.T

2010-12-12T15:34:00.000-08:00

Welcome to my blog. I've decided to put up this blog for the following reason:

1. To share my knowledge about investing with focus on the stock market.
2. To gather information about Philippine stocks and other market and share it to everyone like news, disclosure, and etc. In this way, this blog will serve as my online archive as well.
3. To share my point of view on the current situation of a particular company and its corresponding stocks.
4. To encourage everyone to invest in stock market.
5. To further enhance my knowledge thru interaction with other people (and so your comments is very much appreciated).