Tag: finance

I read that the upcoming SMC offering has a new price range of P110 to P140 per share. Lower than the P150 per share before the trade suspension and much lower than its peak of about P180 per share. Comparing it with some back-of-napkin figures to similar diversified/diversifying conglomerates:

	Price	EPS	P/E	Return (E/P)
SMC	110	6.14	17.92	5.58%
SMC	140	6.14	22.80	4.39%
SMC	153	6.14	24.92	4.01%
SMC	180	6.14	29.32	3.41%
AC			17.01	5.88%
JGS (’09)			19.28	5.19%
AGI (’09)			23.77	4.21%
AEV (’09)			26.97	3.71%
MPI			27.03	3.70%

JGS, AGI, and AEV will probably have a lower P/E and higher return for 2010 due to higher earnings. While MPI is just expensive at this point. In any case, this seems to show that the quoted price range imputes a significant risk premium. I can think of the ongoing SMC ownership issue. I guess if the government gets ownership, they can screw up profitability :P Anyway, it seems to me the premium is too high and results in a comparatively low/cheap price. Hmmmm,  should I buy up?

UPDATE: Looks like everyone bought up. Shares got gobbled up before you can say “gook”. What do you expect? SMC is a well-established company with good management, profitable existing businesses, and forays into promising new businesses as part of its expansion and diversification. Wishing for a piece of that pie.

Two days ago, there was an 18% spike in the price of DigiTel because of rumors of it being acquired, supposedly by San Miguel who denied it. Unfortunately, I had let go of DGTL a few months back because it wasn’t moving and I figured I’ll just get back soon as I have some cash back. Unfortunately again, I never got back. Besides, I wouldn’t have been able to take advantage of the spike as my horizon is more than a single day.

Continue reading “PLDT-DigiTel Share Swap”

Today was a bloodbath in the market. Everything was red. Maybe in the coming days the market would go up, maybe it would go down. It’s anybody’s guess. But if you find something with good long-term value (as opposed to short-term price) and have the cash, it would have been a good day to buy. Even Henry Sy got in on it.

Last night, I saw this blog post recommending buying of a rather obscure stock. Things like these always remind me of the pump and dump scam. Maybe not to the letter as described in the link but similar: a known expert or guru, a lot of noise and a “buy” recommendation, price rise, sudden price decline, and then no more mention of the stock or, if you’re lucky, a short and belated “take profit” note.

Call me cynical, but I don’t just swallow whatever those so-called experts and gurus are saying hook, line, and sinker. They may know more than me but still I try to study the company, read the news about the company, analyze the information, and come up with my own conclusion whether it’s a good buy or goodbye. It’s usually the latter.

DigiTel, who owns Sun Cellular, seems to be a gaining a lot of interest. P/E at 40.5 is quite high compared to its competitors Globe at 9.4 and PLDT (who owns Smart) at 12.6. Apparently, quite a few people believe that the company is worth a lot.

But one thing that’s holding others back, is that DigiTel has loads of debt. Debt can actually be good especially if you’re setting up infrastructure which takes time to mature and start earning. Allow me to illustrate:

• DGTL has 87B in assets mainly in infrastructure. Say D is 85.5B, E is 1.5B, D/E is 57. If income is 145M, ROA is 0.17%, ROE is 9.67%.
• Now if say D and E is evenly 43.5B each and income is 145M, ROA is still 0.17%, but ROE is a dismal 0.33%.

Remembering that your share of stock is equity, which would you rather have?

Another thing is if DGTL goes belly up, how much do stockholders lose? Is it better to lose 1.5B vs 43.5B? I guess that sufficiently settles it: Debt can actually be good.

A high D/E does seems alarming, but does it look like DGTL is alarmed? Are creditors and suppliers alarmed? Or are there still creditors and suppliers willing to lend and sell? Maybe someone can tell me.