Gus Cosio says so

Ideas on the Philippine Stock Market

Mutual interests

8:25  Thursday  15 July 2010  Philippine Stock Exchange Index  3472.33 (before the open)

This market is unbelievable.  I was thinking that prices were already too high, but it continues to surge.  Of course, high prices do not mean that stocks are already expensive.  The market is dynamic and will continue to adjust to changing conditions.  I can only surmise that investors perceive that conditions are changing constructively.  Long term interest rates are steadily declining which will likely bring more money into the housing market.  That trend will be positive for the economy.  I think that yesterday’s excellent performance from the property sector is telling us that there is future strength in the sector.  ALI, MEG, FLI, VLL and even DMC should benefit from this move.

I also think that lower interest rates will be good for TEL which pay excellent dividends presently running at around 8.8% yield.  I think the IPPs will even become stronger as CAPEX will be more accessible as money flocks into the debt capital markets.

Over-all, I sense a very strong momentum in our market which will likely take us to the next level, i.e. above 3500 in the PSEi.  We may see some consolidation, but that may be quite shallow.  I was one who thought that a sell-off was in the wings, but we have exceeded a resistance which I originally thought to have been just above 3300.  Where we are right now, we appear to be assaulting the 3500 marker with relative ease.

I guess I’ve underestimated the power of local money.  Perhaps, more are getting convinced that cash will not return anything just lying around in SDAs.  People are probably becoming more diligent.  Actually, if the ordinary Filipino wants to take advantage of the market but does not know how to handle it, they should be told about mutual funds which have been performing excellent service for their customers over the last few years.

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July 15, 2010 - Posted by | Financial markets in Asia

48 Comments »

  1. Hi Sir Gus! I have around Php9k to spend on either 1 or 2 stocks. I’m considering getting a position on PNB, DGTL, or MWC. I may also opt to average down on MEG. What do you think is the best move for me? Thanks in advance!

    Comment by Sonn | July 15, 2010 | Reply

    • Sonn,

      Personally, I think if you have 9k to spend on a stock it would be best to buy only 1 stock. Simply because if you’re on an online trading platform the commission of the broker is .0025% or P20 w/c ever is lower. That means if you want to maximize the commision rates, you should at least spend 8k per transaction to have the minimum brokerage fee of P20. As with your stock choices my thoughts are: PNB just broke it’s resistance and has very big potential to increase, short term TP is 37 but FV is 48. DGTL is a potential turnaround just waiting for a confirmation. MWC is a safe stock that increase slowly over time, FV is around P22. Happy investing =)

      Comment by KennyV | July 15, 2010 | Reply

      • Thanks KennyV for the advice. I was able to buy 200 shares of PNB at 33.5, I have 2.4k left but will probably wait for additional funding before I make another transaction. =)

        Comment by Sonn | July 15, 2010

      • whooops, what i mean is .0025 or .25% for the commission rates. Sorry for the typo.

        Comment by KennyV | July 15, 2010

    • Perhaps averaging down on MEG might give you better personal gratification.

      Comment by Gus Cosio | July 15, 2010 | Reply

      • Thanks sir Gus! I was leaning toward averaging down but I wasn’t able to resist on joining the ride with PNB. My next purchase will most likely be averaging down on MEG. Thanks again!

        Comment by Sonn | July 15, 2010

  2. Good Day Mr. Gus,

    Ive read several of your previous posts and found them very exciting. I have also noticed that the interest of the youth has been picking up.. which is a great improvement and would be catching up to the neighboring countries such as Singapore wherein 33% of the population has been investing in equities. I strongly believe that a couple of more people like you can make a difference. I myself have been guided by these words of inspiration and information I hope in the coming years that the Philippines can be as open as the worldwide market as its open with regards to these information. More power to you and all of the Filipino people

    Comment by Foreign Investor | July 15, 2010 | Reply

    • Thanks, Ram.

      Comment by Gus Cosio | July 15, 2010 | Reply

    • I agree, Sir Gus is the man. Thank you for your guidance sir!

      Comment by KennyV | July 15, 2010 | Reply

  3. PNB took a beating today. Another opportunity to take position 🙂

    Comment by Dex | July 15, 2010 | Reply

    • I was able to buy @ 33.5 per share =)

      Comment by Sonn | July 15, 2010 | Reply

      • Good Luck Sonn…wish you all the best!! The most important investment advice which I learned from was patience and perseverance.

        Comment by Foreign Investor | July 15, 2010

  4. Gus,

    Hope the weather is getting better there in Manila. Here in Cebu, we’re having pretty good weather, not so hot and its not raining. I hope you dont mind sharing. But what’s your FV for AP, AEV and DMC? I read that AP is around 22.25 and AEV is around 24.50-25. And, any stock you recommend that’s a good buy with around 10% potential gain in like 3-4 weeks? Thanks! i really appreciate your Blog and help to all =)

    Comment by Raymund | July 15, 2010 | Reply

    • I agree with Foreign Investor. MEG always gives an opportunity for swing trades especially with foreign brokers. If you’re profit already satisfied your stomach level, it’s might be better to sell & reenter again after a little correction. But I guess the glory days of MEG is almost near with REIT and issuance of warrants. Thus, a TP of 2 would be an easy target.v

      Comment by herecomesthebaby | July 15, 2010 | Reply

    • Raymund,
      I think AP is worth at least 24 and AEV should be around 26. We just raised our view of DMC to 26. Right now my best recommendation for a trade is PNB which is worth at least 40 prior to merger with Allied. After the merger it should be worth 48 to 50.

      Comment by Gus Cosio | July 15, 2010 | Reply

  5. what is yout tp on meg?
    bought it when it was 1.40.
    should i take profits already?

    Comment by Mark | July 15, 2010 | Reply

    • For me, I think it would be better to sell. Since history has shown that MEG has an unstable stock price when in grows it goes down but not that much but if your a long term investor maybe around 3-4 months more it could reach in its Fair value level of 1.7

      Comment by Foreign Investor | July 15, 2010 | Reply

      • ◦I agree with Foreign Investor. MEG always gives an opportunity for swing trades especially with foreign brokers. If you’re profit already satisfied your stomach level, it’s might be better to sell & reenter again after a little correction. But I guess the glory days of MEG is almost near with REIT and issuance of warrants. Thus, a TP of 2 would be an easy target.

        Comment by herecomesthebaby | July 15, 2010

  6. Sir Gus,

    Im quite uncomfortable to DGTL at this point and with paper loss of 13%. Try to research its fundamentals and discovered that its Price-to-Book is 5.59 and eps of 0.21. Given the said numbers im really afraid that i will able to recover my loss. Im planning to reduce my position to 50% and add to my EDC (my position PNB 15%, EDC 29% and DGTL 23, EEI 5% & cash 28%). Any insight will be highly appreciated. Thank you.

    Comment by jaayem | July 15, 2010 | Reply

    • Jaayem,
      the reason why DGTL has a very high price to book is because it has a legacy of losses. I’m of the view that they’ve finally turned the corner and will start being profitable from here on in. If EPS is 0.21 then at 1.50 the stock is trading only 7.5X earnings which is not at all demanding.

      Comment by Gus Cosio | July 15, 2010 | Reply

      • Sir Gus,

        Thank you for helping us newbie here.

        Comment by jaayem | July 16, 2010

    • jaayem,

      2010 estimated EPS may be more than 0.21. At the end of 2009, the number of SUN subscribers is around 10M, as of May around 14M. Ilan na kaya as of today?

      Comment by chinky | July 15, 2010 | Reply

      • Chinky,

        I think nasa 15M na ang subscribers ng SUN. That should give higher EPS

        Comment by KennyV | July 16, 2010

  7. Hi Sir Gus,
    Ive been holding on URC since 29.5. Do you think that the company still has the way to move forward especially with the 177M NFS today? But the fundamentals as well as their statements look strong till date.
    Any tips sir?

    Regards,
    Ram

    Comment by Foreign Investor | July 15, 2010 | Reply

    • URC–NFS for today was actually 111M

      Comment by Foreign Investor | July 15, 2010 | Reply

    • Ram,
      I am pretty bullish on URC in spite of foreign selling. We think the stock is worth at least 35. We’ve actually upgraded our view on URC.

      Comment by Gus Cosio | July 15, 2010 | Reply

  8. Hi Gus, i snatch some FGEN today at 9.90. Chartwise, it’s near the support levels 9.80/9.50.
    Initial target is 12, then 15 as its FV. I’m just wondering why one of the broker’s who recommended this has sold a lot today. Appreciate if you can give your insights here.

    Comment by bluecheap | July 15, 2010 | Reply

    • Bluecheap,
      There was news that Malampaya gas fields would shut down for a month or so. This is where FGEN gets its fuel. This may be one reason. I don’t know of any other. Personally, I prefer EDC to FGEN since much of FGEN’s earnings come from EDC.

      Comment by Gus Cosio | July 15, 2010 | Reply

      • Hi Sir Gus,

        I think your post is one of the best site for Philippine investors.

        Do you prefer investing in direct companies like EDC compared to FGEN?

        The market value of FGEN’s shares in EDC is already the total market value of FGEN. You are getting the other power plants for free, the only exception is the liabilities of FGEN which is being pared down. I think FGEN will not have a problem in raising money to pay its convertible bonds.

        I have the same situation for LPZ which owns FPH and ABS. HI and its investment in EEI. The only drawback is LPZ companies does not declare dividends except for EEI.

        AEV had the same situation (AP, UBP, etc) before but increased mainly due to the performance of AP. If you look at the liabilities of AP, it may have the same leverage as FGEN.

        Comment by alex | July 15, 2010

      • Alex,
        I prefer investing directly in EDC rather than FGEN because it is a purer trade. That is not to say that FGEN will not perform because other investors may prefer a diversified exposure in FGEN, i.e. natural gas and geothermal.

        Comment by Gus Cosio | July 16, 2010

  9. Hello Sir Gus! Sold my AC stocks today at around 8% net gain, and am looking at buying other stocks again. I still have PNB, FGEN, EDC. What do you think of buying GMA7 or more PNB? Thank you Sir Gus!!!

    Comment by newinstocks | July 15, 2010 | Reply

    • I’d go for PNB rather than GMA&.

      Comment by Gus Cosio | July 15, 2010 | Reply

  10. Sir Gus, there are experienced traders who recommend conserving cash. I just sold my last position of a good stock, with an accumulated gain of around 23.8%. This was the only stock that was in positive territory, profit wise. I am currently 23% cash. What do you think? Would you recommend utiliizing some of my cash to buy additional stocks. Among these stocks at current prices, which do you recommend DGTL, EDC, LPZ, MPI or MEG? Thank you

    Comment by Nel | July 15, 2010 | Reply

    • Nel,
      I’ll probably go for EDC.

      Comment by Gus Cosio | July 15, 2010 | Reply

  11. Sir Gus, Gentlemen:

    Any idea on JGS at 17.25?

    Thanks

    Comment by alex | July 15, 2010 | Reply

    • You can bargain down till 16.5—- this is the current market price…but I still believe the future IPO of Cebu Pacific is quite costly but this still has some upside..
      That is my suggestion

      Comment by Foreign Investor | July 16, 2010 | Reply

      • Thank you Sir Gus, Mr. Foreign investor.

        Comment by alex | July 16, 2010

    • Alex,
      I think JGS has fundamental value and momentum. If you like it, try and identify good pull-back levels.

      Comment by Gus Cosio | July 16, 2010 | Reply

  12. Gus,

    Liquidity is great, but a market-driven by liquidity is treacherous. It becomes tougher to spot fundamentally sound companies as analysts tend to keep upgrading their forecasts to keep up with market movement. Beware, folks.

    Comment by Goose | July 16, 2010 | Reply

  13. Avoid GMA/Gmap a year after election Revenues/profit will go down…GMA might go back to 4/sh by next year…

    Comment by Dave | July 16, 2010 | Reply

    • Dave,
      I think GMA7 had disclosed the political ad revenues separately. I think their core revenues will hold at present levels. People are just putting a discount on GMA7 because of the threat of ABC5 and because media stocks are not in favor worldwide. Personally, if this stock settles around 5.50, it will be a decent buy.

      Comment by Gus Cosio | July 16, 2010 | Reply

  14. Sir,
    Havent followed MER. What do you think of this stock? Is it still cheap to buy?

    Comment by Mark | July 16, 2010 | Reply

    • Mark,
      I like MER but at cheaper levels. I’ll buy it below 180.

      Comment by Gus Cosio | July 16, 2010 | Reply

  15. AgriNurture planning September IPO

    Any thoughts? It had its introduction at 23.5 an now at 16..
    Future looks bright they might also have their land under REIT

    http://bworldonline.com/main/content.php?id=14307

    Comment by Foreign Investor | July 16, 2010 | Reply

    • Ram,
      The stock had been recommended to me by the people who listed ANI “by way of introduction.” Personally, I would wait for the IPO where the price and value are both transparent.

      Comment by Gus Cosio | July 16, 2010 | Reply

      • Meaning after the IPO? Or after a the annual stock holders meeting on July 23. Maybe it might be more transparent after that

        Comment by Foreign Investor | July 16, 2010

      • Yes Ram,
        It would be better to go for the IPO. The annual stockholders meeting will not say anything we do not already know.

        Comment by Gus Cosio | July 16, 2010


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