Gus Cosio says so

Ideas on the Philippine Stock Market

You better watch out, you better not pout!

6:10pm  Monday 14 December 2009  Philippine Stock Exchange Index  3042.10 (0.36%)

When December comes, the market not only slows down but it does get a little bit distorted due to the thinness of volume.  PLDT said that its 2009 income will be around Php 41 Billion which is slightly above what analysts forecast.  TEL has recovered quite credibly since 3 months ago when it had lagged the market due to worries about the Meralco acquisition.  Time always allows us to judge things better.  As the financial concerns between TEL and MER become more transparent, I believe that investors will start to appreciate the higher value of the two stocks.  Personally, I think that in the long run, the cooperation between two business entities which depend so much on a network of electrical and telephone poles and wires can only bring positive results for both – economies of scale.  The Philippines is a country which does not really have a super conglomerate of this magnitude.  If you look at Indonesia and Thailand, countries which are close to per capita GDP, they have a good number of companies whose market cap and scope of business measured by gross revenues is much larger than out biggest corporations.  Normally, that is good for the markets.

Anyway, I expect TEL to gradually do better in price in the final days of 2009.  MER might not do better but I expect the support for MER to be strong below 200 and ver strong below 190.  FGEN is looking to gather support already after it completed its rights offering.  Investors are now seeing the real value of the stock.  I think that FGEN is now finding itself in stronger hands and should be moving better in the coming days.  The surefooted AP has been treading higher a fluc at a time.  I think this stock will continue to move better in 2010 given that analysts expect a revenue boos of around Php 4 billion as new plants come on stream and become consolidated in AP’s results.

Today, we also saw the listing of MEGW1, the warrants of MEG.  Just for your information, warrants are long-term options.  The warrants  give you the right but not the obligation to buy MEG shares in the future until the date that the warrants expire.  In this particular case, when you have a MEGW1 warrant, you can buy a MEG share for Php 1.00.  With MEG trading at 1.46, I somehow feel that the warrants trading at 0.61 is a bit too expensive.  I always thought that an option that was deep in the money, should not be as expensive – valuation wise – as an at the money option.  There is even the dilution factor to contend with which should adjust the arbitrage slightly lower.  Nevertheless, I think these warrants are a good trading instrument specially for a market like the Philippines where there the trading suite is not so wide.

I just want to remind your persistent traders out there to watch out for the Santa Claus rally that normally heightens between Christmas and New Year’s.  Just remember that in the Philippines, the safer bets are the large caps.  In my view the best year-end bets would be TEL, AC, GLO, ALI, MBT, BPI, SMPH and SM.

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December 14, 2009 - Posted by | Financial markets in Asia

2 Comments »

  1. Hi Tito Gus! Great articles you have here. Ill always pass through this everyday.

    Comment by Ernesto Miranda | December 15, 2009 | Reply

    • You’re very welcome, Ernie.

      Comment by Gus Cosio | December 15, 2009 | Reply


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