Chelsea [C 1.53 2.55%] [link] booked a net loss of P3.9 billion in FY21, which is 18% worse than the net loss it booked in 2020 amid the full weight and chaos of the original COVID lockdown that crippled demand for the company’s passenger, tanker, and tugboat businesses.
Chelsea said that its consolidated revenues were down 4% in FY21, with declines in those same business segments.
One bright spot was Chelsea’s freight segment, which was up 30% y/y; freight’s performance has now exceeded its pre-COVID levels.
Another was Chelsea’s logistics segment, which grew 41% and brought in P519 million in revenues.
Logistics accounted for 12% of Chelsea’s revenue in FY21, up from 9% in 2020. Philstar reported that Chelsea pinned the blame on its degrading profitability on “nonrecurring items” that include things like “selling assets below book value.” Chelsea said that it is encouraged by “pockets of recovery” in the industry.
The company recently had its application to increase its authorized capital stock, from P2 billion to P3.5 billion, approved by the SEC earlier this week.
Chelsea is owned by Dennis Uy, friend of President Duterte and financier of Duterte’s 2016 campaign for the presidency.
The company conducted its IPO in 2017 after Uy consolidated a number of logistics companies that had been owned under Phoenix Petroleum [PNX 10.48 0.19%].
The company stapled “Infrastructure” to its name in 2019 to signal its intent to more broadly participate in President Duterte’s “Build, Build, Build” infrastructure development program, then bought and held a significant share of Dito Telecommunity along with Udenna Corp, Mr. Uy’s private holdco, and China Telecom.
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Regardless of business performance, which if we’re being honest, has not been very good, the biggest issue with Chelsea (for me) has always been its lack of consistency or predictability.
As Barkadans will know, I’m a huge fan of the logistics business, so I was excited to see Chelsea enter the market a few years ago as something of a pure (if a little disjointed) logistics play covering people, products, and energy.
Then they started throwing out unsolicited bids to develop regional airports.
Then they acquired a massive stake in what would become Dito Telecommunity.
The company has been an absolute frankenstein of business interests in the five years it's been on the PSE. Early on, investors were quite excited in Chelsea; the shares traded at a peak of P10.72/share back in late 2017.
But they promptly lost over half of their value over the next year to P4.80/share in late 2018.
There was a recovery through 2019 to the P8.50/share region, but the COVID crash in 2020 sent the price down P2.08/share.
While most companies have recovered from that intense selling pressure, Chelsea has only continued to slip into the red.
The stock is down to P1.53/share, which puts it down 86% from its 2017 high, down 82% from its 2019 recovery, and down 26% from its COVID Crash low.
It’s been sometimes hilarious to read Chelsea earnings reports with its traditional logistics business units talking in detail about small operational issues with tugboats and passenger ferry engine maintenance, all while participating in some of the highest-profile telecommunications transactions in the country’s history and basically saying just about nothing about that at all.
The news that Chelsea is looking to raise money to fund “current and future” projects and “working capital” is actually a good contrast to our discussion above. Is this like Cebu Landmasters [CLI 3.01 1.69%], where its potential equity raise is backed by the tailwind of massive demand for its products and services, or is this more like a company selling parts of itself to meet its obligations and keep operations going?
Why dump more money into a company that seems as though it is only used as a helper cell for Udenna’s broad spreadsheet of infrastructure dreams?
Will Chelsea even have the same pull for these airports, ports, and whatever else now that Uy’s friend is coming to the end of his term in office?
Lots of questions here. If the equity raise is public (and not a private placement to Udenna or some other affiliate), it will be very interesting to see how Chelsea pitches this to investors.
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