Gus Cosio says so

Ideas on the Philippine Stock Market

Going our way?

9:00 am   Thursday  18 March 2010   Philippine Stock Exchange Index  3088.05 (+0.095%)  Wednesday close

Market action on Wednesday, while it disappointed me, did not surprise me.  Initially, it looked to me that traders and fund managers alike were willing to make heavier commitments to the market, but the prospects of a technical stonewall represented by the triple-top formation in the PSEi chart just above the 3100 was scary enough for people to back down.

There was heavy selling of AC which I do not really understand as the stock looks cheap when you factor in the value of ALI.  If we believe that ALI will perform resulting from the presentations of renewed development initiatives made by the new ALI head honcho, then AC should be higher in price even now.  I think that there is some large supply of AC looking for a home.  I would watch this stock should it fall to 290 or below as a good buy.

TEL was a technical trader today.  Having recovered to its ex-dividend value, it seems to have touched the bottom of its range encouraging further purchases of the stock by investors.   I think the firm support is now established at 2535 and a short-term target is around 2650.

One stellar performer today was PIP.  This stock is very encouraging to own.  The company in the Philippines is more profitable than Coke, according to an analyst friend of mine.  On top of this, sugar prices have already tanked raising the prospect of a heftier bottom line for the company.  One reader asked me if it was good to pick it up at these prices.  I replied that I was very comfortable with PIP because it pays good dividends, and that is important in a low-interest environment such as what we have today.  Likewise, the sustainability of earnings can be expected because of their leadership in the non-carbonated segment.  Gatorade is practically the only recognized brand in the sports drink category and is growing in sales annually.

All the markets in Asia were up spurred by the rise in Wall Street the previous day.  Europe followed suit as no negative news appeared on the horizon so people are more focused now on the economy.  The U.S. was again strong with the DJIA surpassing the highs it had seen in January this year before Obama threatened more banking regulation.  A wall street analyst wrote a few reasons why he thought the equities market was in good shape.  a) The transport sector is rallying suggesting that businesses are shipping goods which in turn signals an uptick in economic activity.  b) The credit situation in the financial sector is improving indicated by less defaults and improved loan demand.  c) There is still a lot of cash in the sidelines parked in Certificates of Deposits (CD) and money market.  d) There are still a lot of skeptics in the market.  Don’t some of these reasons sound familiar in as far as our local market is concerned.

There is a bit of good news in local business.  The  Bureau of Internal Revenue surpassed its collection target for the first two months of the year by about 10 billion pesos ($219 million) and the Bureau of Customs by about 5 billion pesos.  The peso rose 0.3 percent to 45.613 per dollar.  International reserves exceeded $46 billion in the first week of the month from $45.7 billion at the end of February.  Things are going our way on many fronts and if it were not for anxiety over the May elections, stock prices should be a lot higher by now.

Anyway, I am keeping my eye on FGEN, BPC, EDC and AP having seen a minor correction yesterday.  Also there is talk of a consortium forming among AC, MPI and FGEN to bid for Angat.  That should be interesting for all these stocks.  Perhaps, MPI could break out of its 3.00 resistance.  Among speculative stocks , from the activity that I am seeing I think CYBR and SINO have some promise.  I also noticed that LC had been flat for 2 weeks at 0.22 and LCB had seen good volume.  There may be something going on.

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March 18, 2010 - Posted by | Financial markets in Asia

15 Comments »

  1. whats the story behind PCOR’s rally today Gus?

    Comment by mike | March 18, 2010 | Reply

    • Mike,
      You know that PCOR is presently controlled by the Ramon Ang-Roberto Ongpin group. The word is that Ramon Ang is accumulating more shares of PCOR.

      Comment by Gus Cosio | March 18, 2010 | Reply

      • Sir,

        If rumors are true that San Miguel will exercise its option, will a tender offer be required? At 6.7 per share?

        Thanks.

        Regards,

        Warren

        Comment by Warren | March 18, 2010

      • Warren,
        Actually, the San Miguel price is 6.85. Market is moving on that possibility although there is not time table yet. These things are always worth the trade as long as you come in early then take your money and run.

        Comment by Gus Cosio | March 18, 2010

      • Thanks.

        Comment by Warren | March 18, 2010

  2. Hello Sir Gus.

    After adjusting my portfolio and taking some profits, I currently have JGS shares that are close to 15% of my total holdings, with the average acquisition price at 7.90. Do you think it is still wise to accumulate more of this stock at its current level? Is the CebPac IPO solely fueling the rise of JGS shares?

    Thank you.

    Comment by Finch | March 18, 2010 | Reply

  3. Finch,
    If you own JGS at 7.90, you could add to make it 20% of your portfolio. Yes JGS will remain strong because of Cebu Pac, but remember both URC and RLC are also very strong.

    Comment by Gus Cosio | March 18, 2010 | Reply

  4. Sir Gus – Your thoughts on the announced IPO of Cebu Pacific? Do you think this will generate public interest this time? I wasn’t into investing when the last time they planned to do this in 2008, but using the framework you used in response to my question about Global Asiatique’s, then it might not be that attractive i.e.

    CebuPac = Airline = Non-growth industry = vulnerable to vagaries of jet fuel prices

    These are off the cuff, and I have not looked into the benefits in terms of larger fleet and market share, but would really like to hear your thoughts on this, Sir. 🙂

    Thanks, thanks!

    Jet

    Comment by Jet | March 18, 2010 | Reply

    • Jet,
      As I write, Cebu Pacific is giving an underwriters briefing. I can only get a better picture when I receive the report from my analyst friend. My take on the matter is: you may be mistaken that it is a non-growth industry. Globally, yes. Domestically and regionally, no particularly in the budget segment. The key to profitable airline ops is maintaining the profitable routes and dropping the missionary ones. I think the budget model is able to address that. As to fuel, there is always the ability to tack in a fuel adjustment charge. Nowadays, with a highly mobile populations, airline travel is no longer a luxury.

      Comment by Gus Cosio | March 18, 2010 | Reply

      • Gentlemen,

        Southwest Airlines listed on NYSE is where Ceb Pac seems to be paterned. Maybe worth taking a look at its performance in relation to budget airlines.

        Also, what would be relationship between election campaigns and air travel?

        I have been traveling by air when Ceb Pac just started operations and the airline travel costs is very prohibitive.Easily twice as it is now. It was revolutionized by budget carriers. Marketing and demand wise, it seems to make sense and it thus fulfill an untapped demand.

        There is also UIC. While JGS is minority at around 35%, the market value of its holding is easily P30B at the current S$ 2.02 /sh for UIC. While this will not be realized as the stake is not being sold, UIC is an investment with steady stream of income as it has malls, hotels and office buildins. That I think is something worthwhile and worth valuing.

        Thanks

        Comment by alexis agujetas | March 18, 2010

      • Thanks for the quick reply, sir Gus! For sometime, I was under the impression that the airline industry was well past its peak given the competition between carriers, both in the domestic and international routes. PAL’s experience from the late 90s onwards probably gave me that mis-impression. I guess PAL was just slow in developing a viable business model, not to mention dropping those missionary routes, that while convenient and enjoyable, were not frequent destinations.

        I hope you could share with us more insights on this IPO once you’ve read your friend’s report.

        Again, thanks!

        Jet

        Comment by Jet | March 18, 2010

  5. Sir Gus, Gentlemen:

    Southwest Airlines, listed on NYSE have the same business model as Cebu PAc and it maybe worth looking at for a study of comparison.

    I had been traveling by air when Ceb Pac is just starting and cost of air travel is easily twice expensive. Budget carriers revolution it and it seems to me that it thus fulfill an untapped demand and eaten some of the traveling market share of buses and ferry.

    Also in mid term, will there be relationship between elections and air travel?

    Another is UIC. While JGS is minority at around 35% the current market value of its holding is more than P30B at S$ 2.02 per UIC share. While this is unrealized until it is actually sold, UIC have steady stream of income each year from mall, office rental and hotels. Such I think is worth valuing.

    There is also DGTL, which is currently in the red. At 10m subscribers, more than half of which seems to be on the post paid plan( I hope we can have somewhere to get a more accurate data) although I suppose at plan P350 per month, it would indicate that those subscribers are locked in for at least a year. More stable I think than a low end prepaid user. The unlimited service is value for money and in anything I believe value will prevail in the long term.

    What is there now that was not there 2 years before for sun cellular of digitel? One answer I think is the 5000 plus cell sites. Meaning improve coverage and service. And at a very reasonable rate per month, also revolutionizing the cellular phone in the Phils, consumers, will surely take a look at it.

    I have friends who told me that sun cellular had sometimes limited and low signal. My response is being cheap may have its difficulties. But those who cannot afford a car and taxi to travel daily uses buses and mrt and they form a large part of the Philippine consumers.

    Regards

    Comment by Alexis Agujetas | March 18, 2010 | Reply

    • Alexis,
      I guess what you’re saying is JGS should be a bargain at today’s prices. I would agree with you. Personally, I am excited on the Cebu Pacific IPO. I hope that they do not price it so expensively/

      Comment by Gus Cosio | March 20, 2010 | Reply

  6. Sir Gus, what could be a good target price for GLO? 🙂 tnx!

    Comment by JimBoy | March 18, 2010 | Reply

  7. follow up question sir gus, ive noticed that PAL had significant drop today, is this because of comming IPO of cebu pac? what do you think is the future of PAL? is this stock a good buy in this low level? will this have a significant effect on PNB since they are both under Lucio Tan?

    Comment by JimBoy | March 18, 2010 | Reply


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