Quick Take: Trouble brewing in paradise? and 4 more market updates
Premiere Island Power REIT [PREIT 1.50 2.6%] [link] has fallen all the way back to its IPO price of P1.50/share. The stabilization fund expired a week ago, so any selling pressure will not be countered by any official scheme to manipulate the stock’s price to protect IPO investors.
MB Quick Take: Interest rates are headed higher, which should still compress REIT valuations even further. Whether this next raise has been “priced-in” to PREIT and the rest of the index remains to be seen, but it feels like the MB REIT Index has been reactionary (so far) to whatever the BSP announces. The volume of PREIT’s selldown from P1.59 to P1.50 was pretty high over the past two trading days, relative to what we’ve seen over the past couple of weeks.
Xtreme Appliances (XTREME) [link] using aggressive expansion plans in 2023 as a stepping-stone for an IPO. XTREME’s President, Adrian G. Lim, said that the company is aiming to have 80 company-owned stores by the end of 2023 as part of his goal to grow XTREME’s revenues from their current P3 billion (with 24 stores by the end of Q1) to P5 billion. At that level, Mr. Lim believes the company will be “sustainable” and ready to list.
MB Quick Take: XTREME’s hyper-growth strategy requires it to expand so fast that it will need to develop stand-alone stores that are outside of XTREME’s traditional placements inside of malls run by Robinsons, SM, and Ayala. To me, without knowing anything of their financial statements, that’s the make-or-break part of the plan. Stand-alone location development just takes more time and (usually) more money to go from idea to operations, so XTREME will have to do a great job of explaining away any hiccups or delays. I’ve never been to an XTREME location,, but anything has to be better than SM Appliances, right? “Sorry po, no stock.”
Synergy Grid [SGP 11.9 0.5%] [link] might come under pressure according to Biz Buzz rumors. Per the Inquirer, “sources” are saying that National Grid Corporation of the Philippines (NGCP), the power distribution monopoly owned by Henry Sy Jr. and Roberto Coyiuto Jr., will be “the next big corporation that will come under pressure”, with the alleged aim to potentially re-nationalize NGCP. SGP owns the companies that own the companies that own a 40% interest in SGP.=
MB Quick Take: After the previous administration’s smash-and-grab approach to corporate manipulation, the Overton window has likely been pushed so far to the extreme that any attempts by regulators to push NGCP around would look downright civilized in comparison. Are these rumors potential threats to SGP’s dividend? Perhaps. But just like our experience with Philweb [WEB 2.7 0.8%], Manila Water [MWC 20.0], and ABS-CBN [ABS 7.3 0.4%], it’s probably better to wait for some circumstantial confirmation. If we all of a sudden see a lot of noise coming out of the Senate about needing to take a “second look” at NGCP, that should get our ears up. I’m not a fan of how Mr. Sy and Mr. Coyiuto were able to side-step the rule to list their monopoly through this ugly corporate structure, but credit where credit is due: the dividends have been (so far) consistent and as advertised.
Bangko Sentral ng Pilipinas (BSP) [link] Governor, Felipe Medalla, said that the BSP’s March rate hike will “most likely” be the last increase, with the interest rate topping out at 6% (from the current 5.5%). Mr. Medalla also said that once the BSP is “done” with its rate increases, it will look to implement a 200 basis point reduction in the reserve requirement ratio (RRR) for banks.
MB Quick Take: I think it’s a little rich for the BSP to be raising interest rates on consumer credit cards, under the theory that such an increase will help reduce inflation by disincentivizing consumer spending, while at the same time openly fighting to slash the RRR for banks which will dump billions of pesos into the system. It’s also worth noting that the “tone” of Mr. Medalla is much softer than the tone of the U.S. Federal Reserve, which has said (repeatedly) that the fight against inflation will probably cause rates to go higher than expected, for longer than expected. This is why the next round of economic information is so crucial.
Robinsons Land [RLC 14.8 1.2%] [link] President, Frederick Go, has been appointed to the role of “advisor on investment and economic matters”, to be assisted by Rafael Consing Jr. who was also recently appointed to a similar role from his posts within the Razon Family’s group of companies.
MB Quick Take: Mr. Consing resigned from his various posts when he was appointed, but so far, it doesn’t seem as though Mr. Go has formally resigned from RLC or any of the other companies that he currently owns and directs. The move comes amid a noticeable uptick in reputation marketing for Mr. Go.
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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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