Gus Cosio says so

Ideas on the Philippine Stock Market

Just some thoughts

3:15 pm Monday  27 September 2010

DGTL seems to have hit resistance today.  I thought that it would have broken resistance.  I guess I was wrong.  There is danger that the price could fall back to the 1.50 level again, particularly if some bad news spurs heavy profit taking.  What encourages me is the value turnover on the stock today despite the declining mode the stock was at after the opening at 1.74 attracted a lot of sellers.  We can surmise that the sellers were all profit takers who managed to buy DGTL around the 1.40 to 1.50 area.  What will likely proceed from here is a tug-of-war between the profit takers and those who like the DGTL story going forward.  Needless to say, I like the DGTL story going forward because it is not a stock that is being abandoned.  It is simply a stock that is attracting quite a bit of trading, and to me, that is good.  Having said that, I recommend for people to continue trading the stock and follow the sentiment flow.  While I like the fundamentals of the stock, I think the technical  and momentum conditions dominate trading of this stock.

AP is also a stock to watch because it has been consolidating over the last two weeks.  some analysts are saying that there is very little room for revenue growth in the second half of the year and also next year.  This was because WESM was ver favorable to AP this year.  I, however, share a differing opinion because of capacity considerations all over the country.  We are still in danger of running into a shortage by 2012 if new capacities do no come into stream by the end of next year.  What this tells me is that the underlying demand for electricity will remain firm and the WESM will boom again next year to the benefit of AP.  It is definitely consolidating and my bet is that it will trade below 20.  That is where I would like to own a lot of AP.

DMC appears to me as the next strong stock to approach consolidation.  I noticed resistance above 29.  DMC is a stock that has exceeded my expectations.  I believe that after a correction, DMC will be even stronger than ever.

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September 27, 2010 - Posted by | Financial markets in Asia

74 Comments »

  1. Sir Gus,

    I saw posts to the effect that people wonder at the condos and real estate sprouting out all over Manila. For instance, ALi and Meg are heavily concentrated on Fort Bonifacio.

    Contrast it with Rlc, its malls and real estate are highly scattered in mnl and the provinces. I think that it is one company that have very good business model and will likely prosper in the years ahead if only for the malls.

    What is with JGS currently Sir? Its movement is amazing, not so many stocks jumps like it did.

    Thanks

    Comment by alex | September 27, 2010 | Reply

    • Maybe its due to the upcoming Cebupac IPO.

      Comment by Cholo | September 27, 2010 | Reply

    • Alex,

      I’m glad JGS is moving the way it is. I placed my bet on it last monday at 21.70. Took awhile for me to choose between JGS and MPI then. I’m glad of my play. I was expecting it to hit 25 in the first week of Oct but its now 26. JGS movement is due to the upcoming IPO on Cebu Pac this Oct. Moreover, It is a very fundamentally sound and profitable company. I hope to see 30 very soon 😉

      Comment by Gordon Gekko | September 27, 2010 | Reply

      • watch out…i guess jgs upside is until the cebu pacific ipo…….knowing this shrewed business…..we must take profits a week or thereabouts before cebu pac lists its shares……

        Comment by mike | September 28, 2010

    • It is definitely because of the Cebu Pacific IPO which will greatly reduce JGS debt load because reducing debt always benefits shareholders.

      Comment by Gus Cosio | September 29, 2010 | Reply

  2. Good day Sir Gus,

    Firstly, salamat po for this blog of yours. Truly opened our senses to what’s going on in the market.

    Sir, what are your thoughts about RFM? Has been in the doldrums lately … oversold na yata…

    Thanks

    Comment by cram | September 27, 2010 | Reply

  3. Hi sir,

    Is it still good to enter the power sector today? I was thinking of either FGEN or EDC.. I had them before but I unloaded them and spread them elsewhere. Now that I have extra funds, Im thinking of acquiring them again for a long term hold.. Ive tried researching about our power industry, and presently, I have read only a few promising news about it.

    Thanks!

    Comment by Benjie | September 27, 2010 | Reply

    • Benjie,
      For as long as the generating capacity in the country is below the required capacity, the power companies will have all the pricing power they need. That means they will sell at spot prices beneficial to their bottom line. Of course they will also secure long term take up agreements with distributors, and that is never a problem with distributors.

      Comment by Gus Cosio | September 28, 2010 | Reply

  4. Good Day Sir Gus,

    I think it is normal for those day traders to sell on profit specially when DGTL reached 1.74 mark, but i think because of its good fundamentals these profit takers will buy back in the right timing, for me this will still continue to go up based on fundamentals.

    I am a bit frustrated with ORE & SLI, i dont see yet a convincing move upward, i will still hold on ORE as there will be upcoming shipment this november.. hope i am correct, what is your take on ORE & SLI Sir?

    Comment by Blogspot | September 27, 2010 | Reply

    • Same here, ORE is a big time “ipit” for me but Il hang on to my shares. I hope there will be some good news even before their shipment this November.

      Comment by Dex | September 27, 2010 | Reply

      • I also have been holding ORE for quite some time now… I had numerous chances of unloading it but somethings telling me that its worth the wait… hope im right!

        Comment by Ria | September 27, 2010

    • actually dgtl has bad fundamentals. people are just taking interest on it though because of its potential and its rising market share..

      Comment by cliffhanger | September 27, 2010 | Reply

      • Sorry Cliff, but I disagree. I like the fundamentals of DGTL. It is a company that managed to turn its fortunes around. The owners of this company would not have made such an effort if it were not serious about the business. The Gokongweis are very deliberate in their businesses. I think the track record of RLC and URC bear this notion out. I think even the Cebu Pacific story will also bear this out. DGTL, in my mind, will also bear this out.

        Comment by Gus Cosio | September 29, 2010

      • please check my comment on the next post 🙂

        Comment by cliffhanger | October 4, 2010

    • Ore stock?……..i think its one of those basura stocks……production?? well show me the money

      Comment by mike | September 28, 2010 | Reply

    • Blogspot,
      On DGTL, I think 1.74 was a technical resistance level. No wonder traders took profits. Judging from the relatively comfortable value turnover on the stock, I think traders are quite involved in DGTL which to my mind is a condition that could take this stock to 1.74 again. You can make money trading the range, i.e. 1.60 to 1.74. If you are able to turn once a month with 5 cents profit each turn, you could make the stock a regular money maker.
      On ORE and SLI, I see these stocks as special situations which require some patience. To be transparent with you, I own SLI at an average of 1.77 and ORE at 2.91. I am willing to wait for SLI to cross 2.50. For ORE, I have not identified a threshold price, but I am willing to hold for another 12 months.

      Comment by Gus Cosio | September 28, 2010 | Reply

      • am crossing my fingers with SLI also Sir Gus…. mine was at P2.23.

        Comment by tatels | September 28, 2010

      • Hi Idol Gus,

        Appreciate your continuous feedback!
        On Cebu Pacific IPO as you’ve also mentioned on this blog, would you think that the offered price of 110 – 130 pesos per share is the fair value for this? there are some that say it is high so there would be no much room for improvement, while others say it is still a buy…Just want your personnal view on this. Thanks in advance!

        Comment by Blogspot | September 29, 2010

  5. Thanks for sharing another thought of yours sir Gus 😀 I am also waiting for AP go below 20 but just I read an article posted after trading hours today about AP signing a deal with an Electric Company in Pampanga which might pull up the price temporarily. Here’s the link in case someone wants to check it out:

    http://www.bworldonline.com/main/content.php?id=18447

    Comment by Dex | September 27, 2010 | Reply

  6. Sir, what’s happening to PX? Is it just consolidating? I bought it instead of ORE, did i make the wrong decision?

    Thanks!

    Comment by Cholo | September 27, 2010 | Reply

    • Perhaps profit taking is going on, mining stocks climb steeply in the previous weeks. Others are unloading to book profits and in preparation of window dressing. One reason maybe also is the news of economic recovery in the US, making gold as a commodity less attractive.

      Comment by Cliff | September 28, 2010 | Reply

  7. Regarding AP. Even thought the price is over 8x already since last year, fundamentally it should still be cheap. The last time I took a look, its PEx is hovering at 6x. Thats very cheap. And they are very keen on acquiring more power plants like the unified Leyte, so going forward if they are successful in that, earnings should still rise.

    Regarding RLC. I don’t understand this stock. Fundamentally, its not that expensive and the balance sheet seems strong. But its price last January is 12.50. At 15p, that just a 16% increase. Granted that at any other time, a 16% is quite good already. But.. well, all I can say is that VLL has risen +40% (Though VLL at 1.9 last January was dirt cheap..)

    Comment by jasper | September 27, 2010 | Reply

  8. Hello Sir Gus. What are your thoughts on SPH? I just bought some shares this morning. Hope to hear your thoughts on this stock Sir thanks! Nice blog!

    Comment by MaeAnne | September 27, 2010 | Reply

    • MaeAnne,
      According to the investors relations at SPH, they will likely see net income go to around 150 million this year compared to 20 million or so in 2009. They had to do some clean up of accounts and such matters. It may be a worthwhile hold for the time being. Sometimes, stocks such as this come up with positive surprises. Unfortunately, sometimes they also disappoint.

      Comment by Gus Cosio | September 28, 2010 | Reply

      • SPH is a stock that is being controlled by related parties. I just do not want their previous transactions, like buying the rights/trademarks from its owners and acquiring the franchise of your brother which does not make business sense to me.

        PE wise, this is a stock that is cheap and still trading below its IPO price. It has a sound market in a competetive environment.

        Comment by alexis | September 29, 2010

  9. Hi Sir Gus,

    What are your thoughts about RFM? It’s been unnoticed. A bit oversold already.

    Thanks!

    Comment by Cram | September 27, 2010 | Reply

    • Cram,
      RFM has a very narrow following. I’m not surprised that is has been unnoticed.

      Comment by Gus Cosio | September 28, 2010 | Reply

  10. Hi Sir Gus,

    I am a stock trading newbie and I have been reading your blog since August. I would like to understand the dynamics of the stock market. Would you mind explaining the following terms: consolidation, correction, resistance. How can you tell when these things are happening? Best regards.

    Comment by Nestor | September 28, 2010 | Reply

    • Nestor…

      You can do self-study using this link. Very helpful

      http://www.investopedia.com/

      Comment by jopard | September 28, 2010 | Reply

      • Thanks for the link, jopard. Best regards.

        Comment by Nestor | September 28, 2010

  11. Sir Gus, are there any news on PNB “merger”? Is it a good time to buy at this level? thanks

    Comment by Warrior Princess | September 28, 2010 | Reply

    • I heard that they released a news that the merger will happen in January. I dont know if its true though. But bought some shares earlier at 65.

      Comment by Cholo | September 28, 2010 | Reply

      • Thanks Cholo. *cross fingers*

        Comment by Warrior Princess | September 29, 2010

  12. Sir Gus, what’s your thoughts on JGS? Do you consider share price of P26 expensive? Thanks!

    Comment by lexigirl | September 28, 2010 | Reply

    • Lexigirl,
      In my view the upside on JGS is wide open especially if they pull off Cebu Pacific at the eexpected IPO range.

      Comment by Gus Cosio | September 28, 2010 | Reply

  13. What’s your take on ACR’s power story? Good for long term?

    Comment by Mark | September 28, 2010 | Reply

  14. with a tug of war in dgtl the story becomes that of trading play na lang. malabo yata ma reach ang 2.50?

    Comment by gerald | September 28, 2010 | Reply

  15. wait… did you say a correction is bound to happen? hmmm we have risen 500 pts in just a little over a month i think its possible! the question is when will it happen, any predictions?

    Comment by gerald | September 28, 2010 | Reply

    • You said so yourself, we have risen 500 points in a little over a month. So the question you have to ask is if the correction, if it happens at all, will be worth -500pts AND if there is no chance of use going upward still (Even +100pt till December)

      What I’m driving at is, if a person is so scared of the correction that he/she couldn’t buy then that person probably also missed that big +500pts upward swing.

      And what if the correction came and it was only -100pts? (100 pts in a day is a big deal). You could buy then and make some money (say after the -100pt correction stocks rose to +200 till dec). But it wouldn’t be as big if you had bought earlier still when the market was still very low.

      Basically, I don’t understand why people wait for the correction. Its a little outside our circle of influence. It’s better if we just direct our energies into searching for stocks with value and just buy when you find one. Irregardless of the PSEi index.

      Just my respectful opinion.

      Comment by jasper | September 29, 2010 | Reply

  16. Sir Gus, what is your opinion on this matter?

    -NiHao …(NI) is being primed to be a holding company that will house several mining outfits under its stable and will be patterned after DMCI holdings. NI already has a 30% stake in shipment-rich Oriental Vision (ORVI) and if my memory serves me right, there are early negotiations ongoing for NI to also acquire a stake in Oriental Peninsula (ORE). Will update as talks develop into mature stages.-Chromite Lim FB

    Comment by ron | September 28, 2010 | Reply

    • Ron,
      You’ll have to look deeper into NI if you really like the stock. In my case, I really did not care much for ORE until I looked deeper into it. Having the information I needed verified by reliable persons, I decided that it was worth buying. I mentioned before in this blog that you should have good level of comfort in the stocks you buy. If not, you’ll just be buffeted around when volatility rises.

      Comment by Gus Cosio | September 29, 2010 | Reply

      • Hi Gus

        Care to share what that thing you found out with ORE is? 🙂
        I’m gonna read your older post and see if you mentioned something there later. I vaguely remember you mentioning ORE before but I thought it was PX you were bullish of.

        Comment by jasper | September 29, 2010

  17. Sir Gus,

    How about cmt? What do you think? Did it just breaks out from a pennant?

    Comment by Harvey G. Duarte Jr. | September 29, 2010 | Reply

  18. Sir Gus,
    Any thought on MBT? Planning to buy this stock. Thank you sir and more power.

    Comment by jaayem | September 29, 2010 | Reply

    • Hi Jaayem,
      I recently read a commentary from a foreign broker upgrading their forecast on MBT to have fair value of 92 looking forward around 6 to 12 months. It is not unusual that when markets are as strong as they are that analysts will upgrade their forecasts due to willingness of investors to buy at higher PEs.

      Comment by Gus Cosio | September 29, 2010 | Reply

  19. Hi Sir Gus. What’s your take on CMT and ACR? Am planning to buy some ACR since it’s the cheapest power issue. Please advise. Thank you so much.

    Comment by Shan | September 29, 2010 | Reply

  20. Hi,

    Hope you can help me where to look for the IPO prices so I can compare it with the current prices (just curious)Is there a site that has the IPO of each stock?

    Thanks,

    Comment by Taylor | September 29, 2010 | Reply

  21. Hi Sir Gus,

    ALI’s quite looking good nowadays with strong support levels at 17.50. Is it poised to go up? Will REIT have a positive effect on ALI considering they have lots of income-generating properties in its range of malls?

    Comment by Jonathan | September 29, 2010 | Reply

  22. HI Sir Gus, is it still ok to buy JGS at 26? thanks!

    Comment by cholo | September 29, 2010 | Reply

    • Good question Cholo, JGS, trailing price to earning ratio is already more than 20x. But estimated 2010 PER is still quite reasobably cheap compared to other holding companies. The strengthening peso is positive to the JGS group and URC.The recovering stock markets in Europe and US may have positive effects on their investments.tks

      Comment by alex | September 30, 2010 | Reply

  23. Hi Sir Gus,

    I’ve read this from Philstar, it’s about Cebu Pacific and JGS

    “This means that roughly $400 million of the proceeds will go to JG Summit, to be used to generate cash for debt repayment and for other corporate purposes.

    About $75 to $80 million, meanwhile, will go to CEB to finance the downpayment for new aircraft.”

    What do you think is better to buy: CEB or JGS?

    Thank you

    Comment by Jenny | September 29, 2010 | Reply

  24. Sir Gus,

    Will you please comment on the following stocks that I have: whether to hold, sell or buy. MAB, MPI, GLO, DGTL, MEG, SMPH, and AP. Thanks

    Comment by Nel | September 30, 2010 | Reply

  25. Hi Sir Gus,

    Today is the last day before SMDC’s SRO ex-date. Would you recommend dumping MPI or VLL to buy SMDC? Thanks!

    Comment by Sonn | September 30, 2010 | Reply

    • I’d rather dump VLL than MPI. I’m also thinking of dumping my VLL in favor of AGI..

      Comment by Ria | September 30, 2010 | Reply

  26. I dont want to look at PX anymore coz I think I might hurl.

    Comment by Cholo | September 30, 2010 | Reply

    • Its maybe a period of consolidation. But if PX has some promise, it will tell in the long run. Maybe in a couple of months.

      But I don’t know the fundamental of PX so, I really dont know whether one should buy that or not.

      Comment by jasper | September 30, 2010 | Reply

  27. hmm, PSEi is down the past two days. Is this the start of the correction everyone is afraid of?

    Wish I had more money thought. Then I can buy if things go lower.

    Comment by jasper | September 30, 2010 | Reply

  28. My question is— is this the end of the correction????? If not, then we can SELL now and BUY BACK later. OR if it is, then we have to BUY more now…

    Comment by Warrior Princess | September 30, 2010 | Reply

    • that is what everyone wants to know

      but it will probably be a “3 day sale” like last week
      hopefully it wont get too low tomorrow. 4k index seems to be a very good support

      Comment by rodimus | September 30, 2010 | Reply

      • this is making me nervous. ha ha ha

        Comment by Warrior Princess | September 30, 2010

      • I thought you were a Warrior? ha ha ha

        Comment by Foreign Investor | September 30, 2010

      • In a bull market, DO NOT BE AFRAID

        Comment by rodimus | September 30, 2010

  29. Hi Sir Gus,

    Just added DMC another 10%, did you think this will break their recent high of 30? it’s consolidating now, 27 will be the resistance?

    what is your take on ACR compare to FGEN and EDC? I still have SLI aep of 2.16, I will wait for this to go up in 6 months.

    Comment by alssy | September 30, 2010 | Reply

  30. Hi sir Gus, what can you say about Scc? It closed the gap and expecting a bounce technically.

    Comment by Richie lim | October 1, 2010 | Reply

  31. still holding on to SCC….

    Comment by Shan | October 1, 2010 | Reply

  32. Hi guys,

    Im thinking of consolidating my holdings to around 3-4 stocks since I’m having a hard time monitoring them all and I’ve profited from them anyway. My top picks are MPI, SMDC and AGI. I already have them so i was thinking of just increasing my positions on those. Are they good choices for a long term horizon?

    Thanks!

    Comment by Ryan | October 1, 2010 | Reply

  33. SCC has a FV up to 190 according to citiseconline, it has ventured intopower industry and to consider that it is a coal mining industry, for 2011 we will have a some shortage for power and SCC having a coal mine and now a power producer i think we have a leverage here a definite BUY!

    Comment by dennis | October 2, 2010 | Reply

  34. Hope DGTL should start breaking the resistance at ~1.70 next week. Nang maka bawi naman 😀

    Comment by Topmace | October 2, 2010 | Reply

    • DGTL is one of those stocks you dont want rising too fast. For the simple reason that its a mid/long term stock. I think one buys this not expecting a quick play, but expecting to accumulate for a period of time before the big bang! in price takes into effect.

      Its just like PNB. Its price spiked dramatically but for a period of one year, it was stagnant in the 20p range.

      We should buy and accumulate this at this time. While nobody else is believing in it.

      Comment by jasper | October 2, 2010 | Reply

      • Is it possible that its big bang would be a result of its acquisition?

        Comment by Ryan | October 4, 2010

  35. hi sir Gus, I think GOLD will go up to 1350 by december im bullish on mining stock right now,bought back some PX last week…Im bearish on Power like AP,FGen rising Bunker fuel will affect there profit…I think Gasoline ,LPg and natural Gas will start going up next month winter time and big demand during xmas season…

    Comment by Francis | October 3, 2010 | Reply

    • Did you guys know that in Dubai, they have vending machines where you can buy gold bars? Just sharing!

      Comment by Ria | October 4, 2010 | Reply

      • Hi Ria, yes they do they have recently added this service in one of the known hotels in Dubai, Even American banks now are planning to make Gold ATM in the future. Hard commodities are on the rise 🙂

        Comment by Foreign Investor | October 4, 2010

      • http://www.inquisitr.com/86180/gold-dispensing-atm-machines-usa/

        Comment by Foreign Investor | October 4, 2010


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