Gus Cosio says so

Ideas on the Philippine Stock Market

The ranks of investors

10:20  Wednesday  18 November 2009  Philippine Stock Exchange Index   3052.61 (+0.68%)

I just checked out how the market did today and it looks like PX is again on the road to higher prices.  Mining stocks are just so much in fashion among international investors that one cannot be very objective on PX.  PX is unique among Philippine mining stocks because it is very profitable, it has a long history of making money for its shareholders, it is the most credible mining stock in the PSE.  I’m not denigrating the other mining stocks but none can stand at close  ranks with PX and show as much luster.

Anyway, I had a good day out of the office swinging away in Sta. Elena at the I-Remit Annual Golf Cup.  Funny how you don’t miss the market when you’re playing golf.  Nevertheless, I tried to catch up on the developments by looking at some charts and phoning one fund manager, and it looks like some of the banks are once again in the buy list of investors notably MBT, PNB and SECB.  I can’t complain about this sentiment because I’ve been long banking shares for the last 3 months and my patience is paying off.

I must admit, we are seeing some profit taking going on among local institutions.  The rationale is that these firms have to report to their clients and they would like to bank in their gains because cash always looks better than paper profits.  We are just coming to that time in the year when fund managers have to queue up to the various retirement and provident funds to do their song and dance numbers.  In the local scene, I am going to assume that the institutional investors are going to turn very conservative soon.  That means we’ll be seeing further top slicing of portfolios implying that any steep upswing is not likely to happen.  We’ll be seeing a few special situations which make look quite compelling.  I did mention EEI a while back.  I’ll keep reminding readers just to make sure they remember me when the stock reaches 4 pesos.

I also believe that stocks which represents a good portion of the Philippine play will remain buoyant because as the year ends, some foreign funds that have to show a Philippine weighting in their portfolio will be picking up some TEL and AC.

Anyway, it’s been a long day for me from golfing in the morning to mid afternoon, then speaking at an investors forum late in the afternoon until early evening.  My only encouragement is that  a few more people with a good deal of money are being added to the ranks of local stock market investors.


November 18, 2009 - Posted by | Financial markets in Asia


  1. I got EEI at PHP2.50, Sir Gus. I also managed to get a copy of the weekly report from BPI Securities (or BPI Capital) and they are also seeing EEI breaching PHP3.00 soon!

    I will surely remember you when the stock reaches PHP4!

    Comment by J | November 18, 2009 | Reply

    • J,
      If the stock reaches 4.00, I’ll remember you.

      Comment by Gus Cosio | November 19, 2009 | Reply

  2. Sir Gus,

    What do you think would be a good price to take profits with in PNB?

    DO you think that it is still worth investing money into the market or should I already be in profit taking mode?


    Comment by Warren | November 19, 2009 | Reply

    • Warren,
      I’m a bit biased on PNB at the moment. The last I looked at its price to book ratio, it was like 49%. That kind of price to book reflects distressed valuation which PNB is not anymore. While NPL ratio is on the higher end of the industry – PNB’s is 6.9% which is 4th among commercial banks – that number has been seeing gradual decline. I’m relatively confident that it will be lower this time next year.
      The reason I’m keeping my PNB intact is because my cost is below market already. I’m even considering buying some more because my average will still be below market and I’m convinced that the stock is worth at least Php30 which will still be a 40% discount to its book value. For me, keeping some money on PNB is much better than have it sitting on a bank account somewhere.

      Comment by Gus Cosio | November 19, 2009 | Reply

      • I just sold my PNB earlier today, but I think you’re right. I will try to buy this back on dips. Thanks!

        Comment by Warren | November 19, 2009

    • You know, we sometimes have to differentiate our market sentiment from our views on individual stocks. In my style of portfolio management, when I feel that the market may be consolidating, I limit my positions which may mean taking some profits here and there. However, I do not go back to cash completely specially if I feel that the underlying trend of the market is up. It is really money management.

      Comment by Gus Cosio | November 19, 2009 | Reply

  3. Sir Gus,

    What do you think of Atlas? Thanks

    Comment by Warren | November 19, 2009 | Reply

    • Warre,
      I have no idea about Atlas although 2 years ago, they started to redevelop some mines in Palawan. I have a difficult time valuing mining stocks. In fact, I own some LC and MAB and I’m a bit underwater in both. I just have no feel on mining.

      Comment by Gus Cosio | November 19, 2009 | Reply

  4. Hi Sir Gus,

    What’s your take on BPC, looks like it is consolidating at 3.6o to 3.70 range right now, seems to be out in favor of other stocks, i’m anxious to cut loss.. any thoughts?.. thanks and I’m learning so much on your blogs.

    Comment by Ken | November 19, 2009 | Reply

    • Ken,
      BPC moved because it was the grandfather of Meralco. BPC is the parent of ABS and FPH which in turn owns MER and FGEN which in turn owns EDC. While a good number have recently made money trading BPC, it is one stock that over the years have had very weak staying power. Personally, I don’t think BPC is going anywhere now that a deal has already been struck on MER. If you have a 3 month view, I think it will go down first before it goes up. I’d sell the stock on any strength. If you really like it, wait for it to go down before picking it up again.

      Comment by Gus Cosio | November 19, 2009 | Reply

  5. This ANI thing amazes me. At current price it is quite expensive,relative to YTD net income. But the buying has been very strong. Hmmm. Any scuttlebutt on this one?

    Regarding PNB, my minimum target is P40, par value.

    Comment by Melvin | November 19, 2009 | Reply

    • we’ll celebrate together when we get to 40.

      Comment by Gus Cosio | November 19, 2009 | Reply

  6. Melvin,
    Do not forget that ANI was listed by introduction and not by IPO which means that no new shares were brought to the market. Instead, existing share holders are the ones supplying buyers with shares and they’re not selling it down nor flooding the market with shares. So if they control the supply of shares in the market, the price cannot collapse. Alternatively, they can easily squeeze supply resulting in the price creeping higher.

    Comment by Gus Cosio | November 19, 2009 | Reply

  7. Hi Sir Gus,

    Last week, we saw great rally from mining stocks. This week, however, probably goes to banking sector. Thanks to PNB as it remained pretty impressive, breaking the 26 level and onwards to 30 pesos.

    I wonder what could be the next possible play after this. I’m hoping that oil would rally next week or at least before the year ends. I have OV in my portfolio and I would like to know your thoughts regarding this stock.


    Comment by Marcus | November 19, 2009 | Reply

    • If you look closely, banking stocks in general have done well. BDO and BPI have been relatively stable because they are already expensive. The others – MBT, UBP, SECB – have performed pretty well already that is why it is PNB that is due to catch up. RCB may also do so; unfortunately, I don’t follow RCB that closely.
      As to mining, there are 2 that I follow closely -PX and LC/LCB. PX is a superlative stock while LC/LCB has been quite a dog. Hopefully, as they say, every dog has its day. I’ll wait a little longer for LC/LCB to move, but I can’t hold my breath too long.
      I have some OV but I have no clue on other oil stocks. Oil exploration is always speculative, so it is always a throw of the dice. If you’re lucky, you hit pay dirt. If not, then money is taken off the table and you walk away almost empty handed.

      Comment by Gus Cosio | November 19, 2009 | Reply

      • Hi Sir Gus, Im looking at local equities again. Your view on banks is great though I have one question? Are local banks fairly valued or undervalued compared to its peers in Asia? If they are, then going long on local banks is a great idea. BTW, could you please include me in your mailing list. cheers, joey

        Comment by Jose Mari L. Milo | November 20, 2009

  8. I was also checking the Global PE last nite, Dow Jones published average PE is 16+ and S&P500 23+. Do you have figures for PHISIX sir? Last night, there were talks that Asian stocks are now overvalued and there are fears that we are creating a bubble particularly in China. This week’s US economic data was also pointed out, it seems like the figures are pointing to an extension of the recovery period and no way Feds will hike interest rates soon. In fact, they were expecting Fed Rates to continue staying at 0-0.25%. But then again, local market is awash with liquidity. I was surprised Megaworld’s bond offering was 2.4x oversubscribed, it just goes to show that funds are still looking for high-yielding assets. PSALM as well will offer one at 7.25-7.00% and there are talks that it is also oversubscribed. With Megaworld’s better-than-expected offering, do you think Megaworld is a good buy at this level? Ayala Land is overvalued compared to its local peers but an analyst believe that ALI will benefit from reflation due to its strategic land bank. Shld we go long now on properties?

    Comment by Jose Mari L. Milo | November 20, 2009 | Reply

    • Joey,
      we rate the local PE around 17X. Our market is not cheap anymore, but that is not to say that there won’t be money to be made. I think MEG will likely bottom out in this cycle at 1.25 to 1.30 simply because there is new supply coming and the market in general will see some profit taking. MEG is generally a good stock.

      Comment by Gus Cosio | December 3, 2009 | Reply

  9. Hi Joey,
    BPI and BDO are trading around twice their book value. That’s fine for BPI because they have very strong recurring earnings and net interest margins (NIM); unfortunately, BDO’s recurring earnings and NIM do not appear that strong to me. I’m not very sure of valuations of regional banks in Asia. Locally, MBT is only 1.1X book value and so is SECB. UBP is a small discount to book. I have to find the definite number, but PNB is 50% book value before the 134% rise in 9 month income which implies that price to book has gone down further because income adds to book value.

    Comment by Gus Cosio | November 20, 2009 | Reply

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