Quick Take: On Dennis Uy's casino biz and 4 more market updates
2GO Logistics [2GO] [link] will be suspended this morning by the PSE. The tender offer will “cross” today, meaning that SM Investments [SM 913.50 0.7%; 118% avgVol] will provide payment for all of the shares that were committed to the tender offer, and as a result, it will receive substantially all of 2GO’s public float. This will breach the PSE’s rule on minimum public ownership, which is the basis for the suspension.
MB Quick Take: 2GO is officially done. Once it’s suspended, it won’t be traded again before it delists. Any shareholder that did not tender their shares will still own 2GO shares, but they’ll be unable to sell those shares using the PSE going forward. Such is the pain of private share ownership.
ACEN [ACEN 6.02 0.3%; 351% avgVol] [link] teased Q1 net income of P2 billion, up 393% from the P0.4 billion it earned in Q1/22. ACEN’s press release said that its revenues were up 23% to P9.1 billion, due (in part) to removal of the “headwinds” from last year, but also from what ACEN calls its “modest net merchant selling position”. ACEN said that it plans to grow this net selling position through 2023 as more of its renewables come online in the Philippines. Revenues were boosted by better wind resources and new power plants' commissioning in the Philippines and Australia.
MB Quick Take: While you can’t make the wind blow, getting more plants online (of any type) is the sort of thing that is transformative to an income statement. They’re playing the long game, as are almost all of the other companies in the renewables space except for maybe SP New Energy [SPNEC 1.43 1.4%; 35% avgVol], which doesn’t actually have much interest in operating power generation facilities. So for ACEN, its financials get better and better as the projects age to maturity.
PH Resorts Group [PHR 0.57 1.7%; 86% avgVol] [link] FY22 net loss ballooned to P1.1 billion, 154% worse than its FY21 net loss of P0.4 billion. PHR is Dennis Uy’s casino resort business that he is using to build the Emerald Bay casino complex in Cebu. PHR said that construction activity on Emerald Bay was “minimal”, but underlined that this was “deliberate” due to what it called “potential changes in specifications”. PHR also said that, due to the sudden breakup with its white knight strategic investor, Ricky Razon, it would be “recasting its construction timetables and the opening date of the first phase”. For its plan of operations, PHR said that its liquidity will “depend on shareholder advances and/or paid-up capital; and funding from a strategic partner,” that it is talking with “several parties”, but that due diligence processes are only in “various stages of completion.” PHR’s auditor said that there’s a “material uncertainty” that may cast doubt on PHR’s ability to avoid bankruptcy.
MB Quick Take: Another day, another Uy company slapped with that ominous “material uncertainty” line. PHR’s in a boatload of trouble, both as a business but also as a component of a crumbling group of companies that has lost the ability to shuffle advances and loans between the various companies to avoid funding shortfalls like this. Also, saying that “due diligence’ is in “various stages of completion” is as useful as saying that all of my marathon training plans are in various stages of completion. One of those stages is “not yet started”, and another of those stages is “tried it and failed”, and neither of those stages is “successfully ran a marathon”. They’re trying to say nothing, but in a way that sounds impressive.
Philippine Telegraph and Telephone [PTT suspended] [link] confirmed reports that it was looking to raise between P11 billion and P17 billion to “upgrade its network infrastructure.” In a letter to the exchange, PTT confirmed that it would look to raise the funds between Q4 of this year and mid-2024, and that the raise would come “mostly” from equity.
MB Quick Take: “Raising equity” can mean a broad range of things, from doing a follow-on offering or a stock rights offering, to selling shares to a big strategic investor, to selling a bunch of shares through some kind of private placement sale to existing owners. They could also sell preferred shares that convert to regular common shares, like Cebu Pacific [CEB 41.00 2.0%; 91% avgVol] did. The company hasn’t traded for almost two decades and has an accumulated deficit of nearly P12 billion. Any equity raise is likely to nuke whatever existing equity interest there was in the company -- if those public shareholders are even still alive. It’s been a while. Like 19 years.
PLDT [TEL 1254.00 4.6%; 142% avgVol] [link] said in a Q1 teaser that Maya Bank has 1.8 million banking clients as of the end of Q1, with over P21 billion in deposits. The last time TEL reported on Maya’s client base was back on October 12, when it crossed the 1 million mark after just 5 months of operations as a digital bank. This means that Maya’s client acquisition rate has slowed from approximately 200,000 clients per month, to about 150,000 clients per month.
MB Quick Take: Even if we assumed that Maya’s average deposits per user remained static at P11,666, and Maya’s client acquisition rate dropped another 25% to 112,000 new clients per month, over the course of the year, we’d expect Maya to finish 2023 with 2.8 million clients and P32.8 billion in deposits. That’s significant. At what point will it be significant enough for TEL (and SMART) shareholders to demand the unit be spun-off to maximize the value of the asset and give shareholders the chance to allocate their holdings better? Maya's growth is very attractive compared to that of TEL or SMART.
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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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