Yahoo Value Is Twice Of RP Stock Market

Get this: The combined market value of every listed asset in the Philippine Stock Exchange is worth just half of Yahoo! The Philippines has a total market cap of just US$44 billion, less than half of Yahoo!. Better still, while Yahoo! is priced at 1,585 times earnings, PSE stocks sell at about 16 times.

This is the somewhat sobering revelation in an article by Philip Segal, senior Asian correspondent for TheStreet.com as forwarded to me over the weekend by STAR reader Orly Morabe. The article reported that we have been "abandoned by foreign investors, who have been scared off by a return of the kind of cronyism seen during the bad old days of former President Ferdinand Marcos."

But this is not your typical downbeat article on the local economy. On the contrary, it sees opportunity. "Standards of clean government may be slipping in the Philippines, but amid the gloom, bargains are lurking." We are "now the smallest market in Asia... smaller even than all of Indonesia, which has a basket-case financial system." One thing going for us, according TheStreet.com is our "comparatively healthy banks."

TheStreet.com blames political meddling as reason for the down market. "It is the slide back into presidential meddling that has pounded stocks so mercilessly. As the rest of Asia has soared, Manila is down 26 percent since the start of the year, the most dismal performance in Asia." It quoted the local head of country research of Salomon Smith Barney saying that most of the blue chips are trading at a two-year low.

TheStreet.com as with many foreign fund managers, misses Steady Eddie. "Gone was the hero of reform, former President Fidel Ramos. In his place is movie star Joseph Estrada, who is not shy about intervening in the affairs of state if he can help out a friend."

It is also clear that the Estrada administration must clear the air on BW Resources as a prerequisite for winning back investor confidence. TheStreet.com reports that "the low point for Estrada's regime (and Philippine stocks) came this month, when the stock exchange's chief compliance investigator and most of his team quit in disgust after alleged presidential interference in a probe involving one of the president's tycoon buddies."

And between Malacanang and Yasay, TheStreet.com is siding with Yasay. Commenting on Yasay's attempt to stop trading at the PSE, the article conceded that "it was a fiasco, but at least someone tried to do something about suspicious price movements."

But the article offers advice to investors who may want to cash in on the depressed Philippine market. "American investors," TheStreet.com suggests, "should consider a closed-end fund dedicated solely to the Philippines, the First Philippine Fund (NYSE: FPF). It's currently trading at about 4.75, about half its 52-week high of nine and a 21.5-percent discount to its net asset value.

"In its March 1 filing to the Securities and Exchange Commission, the fund said that its "potential is high for a significant rally given that the Philippines, in an Asian context, is severely under-owned by foreign investors." Its main reasoning is that although economic reform has slowed, it has not stopped.

For local peso investors, here is what TheStreet.com article says.

"For those keen on picking stocks, Salomon's favorite in the country is SM Prime Holdings, a shopping mall developer and consumer goods company listed in Manila and with a private-placement ADR. The stock trades at a 40-percent discount to net asset value.

"The other is one of Asia's most interesting success stories, Jollibee Foods Corp., a fast food chain that has done something almost no other fast food chain anywhere has done -- maintain a bigger market share than McDonald's. Jollibee trades at more than a 30-percent discount to fair value, says Salomon.

"Credit Suisse First Boston media analyst Chris Ng said that his top pick in the Philippines is Benpres Holdings Corp. , which already has dominance in free-to-air television as well as cable in the Philippines. It is also preparing to roll out an Internet cable modem service. CSFB forecasts earnings growth of 50 percent this year, and after heavy capital expenditure, 16 percent in 2001."

It is really difficult to understand what is going on at the PSE. Take a look at First Philippine Holdings. It is inaugurating a 1000 MW power plant in the next two weeks whose entire output is contracted for with Meralco. In 2002, it will start using locally produced Malampaya natural gas, making the price of its output very competitive. But its stock market price has unbelievably been going down in the past week. That's what's happening to the Philippine stock market too. The values are there but the market's ignoring all that.

How can it be that an Internet portal managed by a bunch of under 30 Internet geeks is worth more than all the listed issues at the PSE? On the other hand, the net worth of Bill Gates who founded Microsoft is worth several times more than the $14 billion in international reserves in the Bangko Sentral. And to think Malacanang once called that paltry sum a "war chest" against forex speculators.

Dr. Mahar Mangahas can complain all he wants about these premature publications but once a survey report gets into the hands of politicians and bureaucrats, it is a matter of time before media gets it. As far as media is concerned, it is just another news story. If it was just leaked and that sometimes means exclusivity, so much the better.

I can understand Mahar's concern about his proprietary rights over the reports specially in this particular case because it was commissioned by a client, Malacanang. But in something vested with as much public interest as the President's public acceptance, it can't be helped if media uses it as it is leaked by those who got it first.

Come to think of it, if that survey was paid for with public funds, the public has the right to know its results. The danger in the present system of leaking results of surveys is that vested interests may leak wrong data or only those that benefit them. In the end, the integrity of the surveys is open to question. The best thing to do is make it public as soon as they can, with only a few hours headstart for the President and the financiers.

Ernie Espiritu, who probably has had it with his stockbroker, sent this one.

The stockbroker was nervous about being in prison because his cellmate looked like a real thug. "Don't worry," the gruff looking fellow said, "I'm in here for a white collar crime too."

"Well, that's a relief," sighed the stockbroker. "I was sent to prison for fraud and insider trading. How about you?"

"Oh, nothing fancy like that," grinned the convict. "I just killed a couple of priests."

(Boo Chanco's e-mail address is [email protected])