CTS Global [CTS 1.09] [link] H1 net income up 74% y/y on unrealized foreign exchange gains. CTS said that its H1 global trading revenue fell 53% y/y to P28.3 million, and that its local trading revenue fell 46% to P20.2 million, for a combined drop of 41% y/y. While trading revenues are down, CTS noted that it had an unrealized foreign exchange gain of P44.2 million in H1 that saved its weak trading performance by boosting net income significantly.
MB: I don’t think that any of CTS’s IPO investors were clicking “BUY” with the thought of sweet unrealized foreign exchange gains and income from low-risk government debt instruments dancing through their heads, but here we are. Remove the P44.9 million in foreign exchange gains from H1/22 and the P3.8 million in foreign exchange gains from H1/21, and the picture looks dramatically different: H1/22 core net income of P5 million, down 80% from its H1/21 core net income of P24.9 million. That’s abysmal. It’s even worse if we isolate for Q2: core net loss of P6.6 million, down 8,150% from its Q2/21 core net loss of P0.08 million.
COL Financial [COL 3.51] [link] Q2 profit down 57% y/y, slumping 46% q/q, to P49 million, with 1H profits narrowing 71% y/y to P140 million. COL blamed the huge drop in profitability on a “significant drop in commission revenues”, and the lack of non-recurring revenue from the sale of financial assets in H1/22. COL saw an 8% increase in the number of new customer accounts, bringing its total to ~507,000, but noted a 9% drop in net customer equity to P102 billion. COL also noted that the PSE itself was down 13.6% during H1, and that the average daily turnover fell 16.6% y/y to P7.5 billion.
MB: The previous year, COL’s H1 account growth was 23% y/y, and its net customer equity growth was 53% y/y. This year’s numbers are tiny in comparison. While overall market sentiment is important to COL's possible earnings, I don’t agree with COL trying to make some kind of “high bar effect” argument about the impact of its sale of financial assets in H1/21 somehow making its H1/22 look that much worse. The revenue COL recognized in H1/21 on the sale of those assets was just P55 million, which was just 6.7% of its total H1 revenue that year. Take those sales out, and COL still made P424 million in profit in H1/21, and its H1/22 performance is still 67% lower. If I were a COL shareholder, I’d be wondering why the company hasn’t done more to appeal to the masses that flocked to its system during the crypto frenzy and basurapalooza of late 2020 and early 2021.
AllDay Marts [ALLDY 0.35 4.05%] [link] Q2 profit down 19% y/y, surging 215% q/q, to P87 million, with 1H profit slumping 94% y/y to P11 million, largely due to P170 million in losses related to the Alabang fire in January. Operationally, ALLDY noted a marginal 2.2% y/y improvement in H1 sales, but that was considerably less than the 20% y/y sales increase it noted last year. Finance costs were lowered 70% to P10 million due to “loan settlements” made using proceeds of ALLDY’s 2021 IPO.
MB: Forget for a second that the fire never happened. I don’t know if I’m able to patch up the lost sales and opportunity cost of the P170 million spent on dealing with the lost inventory and damage to the property, but just dump that P170 back into the Q2 and H1 financials; nothing happens to Q2 (the fire was in Q1), but the H1 results actually improve so much, from down 94% to up 1% y/y. Yes, Q2 is still a “thing”, because if we put the P170 million back into Q1, that puts the net income there up to around P95 million, and that leaves Q2 down 19% y/y and down 8% q/q. Not the best trend for a consumer-facing business in the midst of a fairly broad consumer-facing business recovery.
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