Alerts

   Frances Rolfa Nicolas

In a disclosure to the PSE, AC announced that it would grant proxy rights to Enrique Razon, which would allow it to achieve a 51% voting interest in MWC. This came following Prime Metroline Holdings’ acquisition of a 25% stake in MWC. AC Chief Finance Officer Jose Limcaoco said that this would allow Razon to take leadership in the partnership but at the same time keep the economic benefits aligned. The agreement will become effective after the closing of the subscription agreement, which will occur after certain conditions are met, including required lenders’ consent and regulatory approvals. Upon the grant of the proxy rights, AC’s effective voting interest in MWC will be reduced from 70% to 31.6%, while economic stake will remain at 38.6%. With the increase in control, Prime Metroline Holdings, Inc. has announced its intention to make a mandatory tender offer for the shares of MWC at an offer price of Php13.0/sh.

   John Martin Luciano, CFA

SECB raised Php2.07Bil through the issuance of long-term negotiable certificate of deposits (LTNCDs), which was upsized from their initial offer of Php1Bil due to strong demand from retail investors. The LTNCDs have a tenor of 5.5-years and will mature on August 5, 2025. Multinational Investment Bancorporation (MIB) served as the sole lead arranger and selling agent in this fund raising activity, with assistance from SECB.

   Frances Rolfa Nicolas

Justice Secretary Menardo Guevarra said that Enrique Razon’s buying of shares in MWC will have no effect in the revision of the concession contract. Note that the DOJ is currently including the inputs on the financial and commercial provisions in the draft of the contract. Mr. Guevarra noted that once the contract is consolidated, the discussions with the water firms may begin in March.

   Justin Richmond Cheng, CFA

PIP disclosed that it received a letter from Lotte Chilsung Beverage Co., advising the company and the PCC that the SEC has directed Lotte Chilsung to cease the conduct of its tender offer. The SEC said that the tender offer must cease pending the resolution on certain issues raised relating the tender offer. In addition, shareholders who tendered must be allowed to withdraw the same shares. Recall that last January 23, Lotte Chilsung reopened the tender offer period at the same price of Php1.95. The extended offer period was supposed to last until 10 business days after the PCC discloses its decision on the transaction. Assuming the PCC decision is made on March 6 after only a Phase 1 review, the tender offer period would have ended on March 6, 2020.

   Adrian Alexander Yu

Maintain HOLD rating. We currently have a HOLD rating on JFC with a FV estimate of Php248.0/sh. We believe JFC’s near-term outlook remains poor as it faces challenges in turning around Smashburger and from rising meat prices in light of the African Swine Fever outbreak in the Philippines and China. It will also be consolidating CBTL in 4Q19 which is expected to drag profitability in the near term as CBTL is still in the red.

   Justin Richmond Cheng, CFA

FRUIT disclosed that it has acquired SoyKingdom Inc., a privately-held corporation specializing in soybean-related products, and Kuxina, a stall concept specializing in Filipino dishes. FRUIT expects rosy prospects from SoyKingdom as more Filipinos discover soybean-related products as a standalone beverage or snack and key ingredient in everyday meals. Meanwhile, Kuxina will complement the company’s Sabroso Lechon, and Heat Stroke Gril.

   John Martin Luciano, CFA

Century Pacific Group, Inc. increased its stake in PIZZA with the acquisition of common shares from the open market. PIZZA disclosed that Century Pacific had bought 8 Mil shares at Php9.50/sh, increasing Century Pacific’s ownership of PIZZA to 53.57% from 53.04% previously.

   Frances Rolfa Nicolas

The Philippine Competition Commission (PCC) has flagged competition concerns in SMC’ s proposed acquisition of HLCM citing monopoly, increased market power, and potential collusion arising from the merger. The PCC also said that the acquisition will result in a substantial lessening of competition in the market for cement in four key areas in the country namely, Northwest Luzon, Greater Metro Manila, Central Luzon, and Northeast Luzon. Note that the PCC included Northern Cement and EAGLE as part of SMC’s group due to interlocking officers and directors among the companies. Moreover, the PCC rejected the voluntary commitments presented by both SMC and HLCM as it did not clearly and sufficiently addressed the elimination of competition in the identified relevant markets.

   Adrian Alexander Yu

The Philippine Competition Commission (PCC) has flagged competition concerns in SMC’ s proposed acquisition of HLCM citing monopoly, increased market power, and potential collusion arising from the merger. The PCC also said that the acquisition will result in a substantial lessening of competition in the market for cement in four key areas in the country namely, Northwest Luzon, Greater Metro Manila, Central Luzon, and Northeast Luzon. Note that the PCC included Northern Cement and EAGLE as part of SMC’s group due to interlocking officers and directors among the companies. Moreover, the PCC rejected the voluntary commitments presented by both SMC and HLCM as it did not clearly and sufficiently addressed the elimination of competition in the identified relevant markets.

   John Martin Luciano, CFA

Maintain BUY. We reiterate our BUY rating on BPI with a FV estimate of Php106/sh based on 1.65X 2020 P/BV. We continue to like BPI because it is poised to take advantage of the country’s healthy economic growth on the back of its strong and highly liquid balance sheet as well as its large branch network. We believe this gives the bank an advantage in growing its loan portfolio given its access to low-cost funding as seen in its high CASA ratio of 69.1% as of end-December 2019. Furthermore, the bank is operationally efficient as it has the lowest cost to income ratio among its peers as it is quite prudent in expanding its branch network.