Quick Takes: SPNEC surges on removal of foreign cap on RE ownership and more market updates
Megawide [MWIDE 3.40 1.5%] [link] gets certificate of finality for dismissal of case for the alleged violation of the Anti-Dummy Law. The certificate applies to four MWIDE executives (Edgar Saavedra, Manuel Louie Ferrer, Oliver Tan, and Jez Dela Cruz) that were also directors of the GMR Megawide Cebu Airport Corporation, which operates the Mactan-Cebu International Airport.
MB Quick Take: This outcome was fairly certain after the original dismissal, yet anyone familiar with our legal system would know that it’s not over until it’s over. Nice to see the storm clouds dissipating just as the ascendant Aboitiz Group swoops in to snatch up control of the Mactan-Cebu International Airport from MWIDE.
Department of Energy (DoE) [link] released a new circular (No. 2022-11-0034) removing foreign ownership cap on all renewable energy projects. The DoE hopes that by allowing up to 100% foreign ownership of renewable energy projects, foreign investors will increase their activity in the country, which should increase the available supply of electricity while also supplying jobs and related economic activity. The previous cap on foreign ownership had been 40%. The new rule takes effect 15 days from publication (so around the start of December).
MB Quick Take: This move is based on a Department of Justice legal opinion that said that the constitutional limit only applies to things that are susceptible to appropriation, but that kinetic energy (wind, sun, ocean) was not susceptible to appropriation, and should be excluded from the constitutional limit. Regardless of what you think of that line of reasoning, this is a huge boost for renewable energy companies in the Philippines, especially those with an excess of viable renewable energy projects, like Solar Philippines [SPNEC 1.31 4.8%], who lack the capacity to develop their portfolio on their own, and who have little (if any) interest in actually operating renewable energy projects once completed. It boosts the potential value of any fully-permitted project for companies like ACEN [ACEN 7.05 0.7%], Aboitiz Power [AP 33.85 1.0%], Raslag [ASLAG 1.70 3.7%], PetroEnergy Resources [PERC 4.38 2.7%], and whatever Enrique Razon is doing under Prime InfraCapital. Valuations are maximized by having more buyers in the mix. Allowing a foreign buyer to take a majority stake further increases potential valuations.
Premiere Horizon Alliance [PHA 0.27 1.9%] [link] board votes to delay shareholders’ meeting, causing its embattled owner/allegedly delinquent debtor Marvin Dela Cruz to throw a hilarious tantrum on Twitter. The PHA board delayed the meeting from December 28 of this year, to March 23 of next year, to “allow [PHA] time to resolve issues involving the proper identification of stockholders”. This caused “Marvz” (as he calls himself on Twitter) to awaken from his 15-month Twitter slumber and post this in an appeal to PHA shareholders to “oppose the postponement” because “one year of losses and poor performance is enough”. Marvz then goes on to allege that PHA failed to disclose a court order in relation to his voting rights, that some of his shares were transferred without documentation, and that there could be an issue with the “Stock and Transfer Agents or similar to ABRA”.
MB Quick Take: As I said on Twitter, this spat would be a whole lot more delicious if it wasn’t also so lame. “Marvz” gained control of PHA through a share purchase agreement that he signed with PHA’s previous owner. He paid for the first tranche of shares using money he borrowed from a colleague. The colleague has since alleged that Marvz failed to pay him back for the loan, and sought to satisfy the loan with Marvz’s PHA shares. PHA said that it would no longer accept shares in Marvz’s “unviable” startup, SquidPay, as payment for the final tranche of shares under the share purchase agreement, and demanded money by the end of October. In consideration of the lawsuit against Marvz that impacts ownership of a considerable chunk of PHA’s shares, and in consideration of whatever is happening in the background with respect to that second tranche of shares (did he pay,, we don’t know!), it makes some sense to hold off on a shareholder meeting until actual ownership of shares can be settled. There are no heroes here. This entire takeover attempt has been a disaster for PHA and its shareholders. I just hope Marvz is able to use his “visionary” powers to “innovate” his way out of this mess!
AllHome [HOME 2.30 8.7%] [link] Q3 profit down 47% y/y (down 29% q/q) to P176 million. 9M profit down 59% y/y to P399 million. Despite adding four new stores, HOME’s 9M sales dropped by 10% y/y, and same-store sales fell by 11.3% y/y. HOME blames this on the Omicron surge in Q1, lower foot traffic from bad weather in August and September, and the shift in consumer spending to “travel/leisure/entertainment”
MB Quick Take: While the 9M figure is ugly, I’m willing to give the Villars the benefit of the doubt and accept that the fire in Alabang at the start of the year was a huge drag on earnings, and that the loss of those stores through the rest of the year was probably material to the outcome. But if things were still AllGood, I’d expect to see the same-store sales growing or at least flat, but they’ve fallen even further than total sales. That’s AllBad. To make things AllWorse, HOME’s stock price is down 77% over the past year, down 72% YTD, and down 57% over the last 12 weeks. The AllKicker: HOME was just deleted from the MSCI Philippines Small Cap Index.
AyalaLand Logistics [ALLHC 3.24 0.3%] [link] Q3 profit up 45% y/y (up 59% q/q) to P226 million. 9M profit up 41% y/y to P565 million. We covered this more in-depth in a previous post when ALLHC teased this result in an October 28 press release. ALLHC’s 9M revenue from lot sales was up 5% to P1.2 billion, but revenues from rentals and storage services were up 98% to P1.3 billion over that same period, with revenue from cold storage services up 59%.
MB Quick Take: ALLHC is confirming, quarter after quarter, what everyone behind-the-scenes already sort of knows: logistics and cold storage services are in demand, and they’re making a lot of money. It’s just hard to see, since all of the major players are private. Representatives from the Aboitiz Group, Metro Pacific [MPI 3.40 0.3%], Ayala Group, and DoubleDragon [DD 7.06 1.2%] are all pounding the pavement. I’d heard that MPI was close to something a few months back, but the noise there has died down so perhaps that deal went cold.
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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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