Quick Take: Aboitiz Equity Ventures supersizes its bond issue and 3 more market updates
Basic Energy [BSC 0.30 3.39%] [link] listing 1.09 billion common shares tomorrow that were sold via private placement to a long list of private individuals and companies in 2007 and 2018. BSC notes that the shares to be listed have all been fully paid. The listing will have no impact on the value and voting power of each share, but it will increase the shares available for trading by 35%.
MB Quick Take: The easiest way to say this is that the 1.09 billion shares were already counted as part of BSC’s “outstanding” shares, but were not yet “registered” and available to be traded on the PSE. When the shares are listed tomorrow, it will be as though 26% of BSC’s shares are coming out of a post IPO lockup. These are shares that were purchased for P0.25/share, so will any of these shareholders look to flip their shares to try and book some of that 20% gain?
Aboitiz Equity Ventures [AEV 57.20 0.35%] [link] board votes to super-size its upcoming retail bond issue from P12 billion to P20 billion. AEV increased the amount to take advantage of “robust liquidity in the capital markets”, and plans to use the proceeds to partially fund its subsidiary’s purchase of the GMR-Megawide Cebu Airport Corporation from Megawide [
MB Quick Take: Rates are going up, and they’ll be going up for a while, so if AEV needs this money to accomplish anything, it’s probably better to sell the bonds now (at the current rates) than to wait a few months and sell when rates are higher. With all of its connections and plush government placements, AEV probably isn’t suffering from a lack of interesting things to spend its money on at the moment.
Metrobank [MBT 52.15] [link] Q3 profit ballooned 77% y/y, and inched up 3% q/q, to P7.8 billion on “lending portfolio expansion, better margins, healthy fee income, stable operating costs, and lower provisions.” While impressive, this quarter wasn’t MBT’s best since the COVID crisis began, nor was it even the best quarter the bank has had this year. MBT’s Q3 net income was about 2% lower than the P8 billion it earned in Q1/22.
MB Quick Take: The reasons match those which were given by BDO [BDO 127.00 0.16%] to explain its recovery, so I think it’s safe to assume that the banking sector, as a whole, is probably going to report the same large year-on-year improvements in Q3 and 9M net income. That said, banks are a trailing indicator, and I’ve had many bankers reach out to me privately (especially in the retail car/home loan sectors) to say that rising rates are scaring customers away from new loans, and are causing some of those already locked into obligations to panic. If rates continue to rise significantly over the next two quarters, where will that leave lenders? If rates remain elevated significantly from this point through the entirety of next year, what will that do for everyone who leaned into the post-COVID growth to take on loans to pay for their new cars and homes that they bought in 2021 or the early part of 2022? It might take a while for the impact of rising rates to truly show up in the earnings reports coming from banks, but my feeling is that we will start to see this in Q1 of 2023.
Universal Robina [URC 126.60 5.68%] [link] Q3 profit surged 19% y/y, and up 19% q/q, to P3.2 billion. Sales revenue was up 32% y/y to a quarterly record of P36.8 billion, which URC attributed to “strong reopening momentum” in the SE Asia region. UCR said that price increases and cost-savings initiatives helped grow its sales and profits for the quarter. Sales in URC’s branded consumer goods segment led the way, up 30% over the first nine months of the year compared to 2021, with contributions from the “international” subset up around 50%.
MB Quick Take: While URC’s recovery looks broad and sustainable, across not only our own markets but also those of other countries, it’s hard to ignore that there are some serious potential challenges that URC will need to overcome to keep the party going. Rising commodity prices will eat away at profits. Huge swings in the value of regional currencies versus the US Dollar could create strange financial outcomes. Changing consumer behavior in response to still-rising inflation and prices could cause some consumers to “downgrade” or shift their spending habits on food as it did during the depths of the 2020 COVID lockdown and the related bouts of financial insecurity that came from it. I’m not saying that they’re going to get crushed by whatever is to come, only that the URC ship is sailing into some pretty uncertain waters that they’ll have very little control over.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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