Gus Cosio says so

Ideas on the Philippine Stock Market

A fool and his money

10:00am  Friday 26 November 2010

I will share my thoughts on the 3Q GDP figures when I write an update over the long weekend.  In the meantime, I would like to share some thoughts on a few stocks due to comments given by some readers.  My good friend Chris shared an idea on VLL with me because I assume he read my comment that I had taken profits on VLL.  He had suggested that because VLL had been gapping up at the close over the last few trading days then it may be a signal that this stock would be moving up soon.

Thank you Chris for alerting me because VLL is a stock where I have a long-term commitment, meaning it will be a stock that I will continue to trade because I like the fundamentals.  At my last count, this stock is still trading at a huge discount from its book value; at least 40%, maybe 50% discount.  Now many investors may not like the principals of the company for one political reason or another, but the fact remains that over the last few years, the company has been delivering well on its projects.  I for one, drive by on of their relatively up-scale project in New Manila everyday; and from what I can see, it is a well-built medium rise development which should be quite desirable when it is finished.  There is also the high-rise across the ABS-CBN studios which from what I gather is also seeing brisk sales.  Both projects are in winner locations.  Of course, VLL is also showing a single digit PE which ought not be ignores.

Another stock, CEB, has been the object of a few queries.  I have recently read full-scale initiation coverage reports of two major foreign houses.  One estimates fair value at 145 and the other at 150.  I continue to accumulate CEB on dips and I am happy to hold the stock until it crosses 140 at which time I will ask myself again if I still wan to wait for 158.  In short, at milestone prices, I will evaluate whether new developments about the company at the time tell me whether the stock is still cheap of has become expensive.

NIKL is also a concern for those who bought some at IPO and added to positions on listing day.  After evaluating the sellers and the sell volumes at various prices, I am of the opinion that 16 will be a strong support.  In my count, over 50% of those who bought the IPO have taken profits all the way to just above 16.  This tells me that those who remain holding the stock are looking for prices higher than 18 before they will sell.

For followers of DGTL, it seems to me that traders holding the stock have gotten worried or disappointed that the stock has not moved.  We are not seeing sell downs in a big way.  We are merely seeing a price erosion.  I think weak holders of the stock ought to exit already because DGTL make take more time before it goes.  I am still convinced that it will return 30% over the next six months, but those who cannot wait it out ought to sell already.

SLI had recovered a bit and should continue its rise except I hear there is a great debate on how they will price their follow on offering.  I think that whatever it is, it should only be good for existing holders.  I would be patient and ride it out.  As for ORE, I will be holding my breath for a while as I follow their scheduled shipment for December.  If they do not ship my Christmas, I will be seriously rethinking my view on the stock.

As for now, I would not worry so much about the market.  I would be rebalancing positions; in fact I sold some EDCs yesterday because it seems to be having difficulty moving forward.  I think FGEN would move in sympathy with EDC as well.  I am considering picking up some MPI soon, but because of Chris’s observation forwarded to me, I am putting my money on VLL today.

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November 26, 2010 - Posted by | Financial markets in Asia

69 Comments »

  1. sir,
    Your thoughts on DMC and AP. AP seems entering a correction while I cant seem to understand DMC price actions. Where do you think I can accumulate at present stock price? thanks

    Comment by Mark Anthony | November 26, 2010 | Reply

    • Mark,
      I am looking to buy DMC below 34. That should come pretty soon. As for AP, as close to 30 as possible is my hopeful buy level.

      Comment by Gus Cosio | November 26, 2010 | Reply

    • I personally think DMC will hold at 34 and will pick up once the market picks up. If it does break 34 then it will dip at or just below 33 before going up.

      AP is not entering a correction. It simply has a very volatile range (relatively). It is still trending up.

      Comment by Mars | November 26, 2010 | Reply

    • Mark,
      DMC and AP have been among the strongest shares in this run-up and for the right reasons. Earnings have proven to have reached a higher plane than most analysts have expected. Being in the infrastructure (power generation and utilities) business,one can almost be assured of strong recurring earnings. Nevertheless, even strong stocks do consolidate and I am actually very happy to see them find lower levels. I would like to see DMC below 34 where I think it would be a reasonable buy. I also want AP to go down below 30, more like 26, but that may be wishful thinking on my part.

      Comment by Gus Cosio | November 29, 2010 | Reply

  2. Not so good news on EDC http://www.visayandailystar.com/2010/November/25/topstory7.htm I’m thinking of selling my EDC issues and add up on VLL as well.

    Comment by finch | November 26, 2010 | Reply

    • I’m not sure what’s the fuss on EDC if it shuts down its Negros operations for 9 months… This Negros plant is supposed to generate 50 MW but since 2007 it can only generate 7 MW. And I believe it’s been contributing losses to EDC. Although they shut this down, I don’t think it should affect significantly the revenues of EDC. I think it would even be more costly for them to run it if it doesn’t generate close to its capacity. My guess is that long term EDC will provide good returns in a few months time..

      Comment by Perocho | November 26, 2010 | Reply

      • Perocho,
        I like EDC, but I’ll wait awhile before buying it back.

        Comment by Gus Cosio | November 26, 2010

      • Hi Finch, Perocho, I agree this plant is not the big issue for FGEN/EDC, but the problem lies in my opinion with the lopez group as a whole. Please see this link: http://opinion.inquirer.net/inquireropinion/talkofthetown/view/20101127-305704/How-the-pipeline-leak-in-Makati-was-found. I talked to Dr. Arcilla last friday, he estimated that tensof billions of pesos might be needed to clean the contamination and the process will last for at least five years. This issue might continue to drag down LPZ, FPH, FGEN, EDC and even ABS by association. My unsolicited advice is to avoid these companies for now.

        PCOR is rising because its rival Shell/chevron are also being dragged to be part of the conspiracy in this controversy. Shell/Chevron are losing 15-20 barrels per day since July (1 barrel ~159 liters), how come they have not reported such leaks?

        Comment by Chris M. | November 29, 2010

      • Thanks Chris for sharing this… 😉

        Comment by Perocho | November 29, 2010

  3. Sir Gus,

    I would like to ask for your insights about FDC.

    This is also trading below its book value of P7.50. With the planned IPO of East West bank and the share placement exericise, do you think this will be priced by the market eventually to what its true worth is..

    Would you know how much is the NAV? Read in some forums that the NAV is P10 or more based on a forumer’s estimate.. citing a study by Philippine Equity Partners last 2007 of P17 NAV for FDC.

    Furthermore, looking at the disclosures, its president Ms. Gotianun-Yap has been buying up shares in the market starting from 3+ up to 5.08.

    Hope you can provide some analysis. This may one of the shares that haven’t reached its potential (unlike others that have gone up several fold).. FDC can still give 100%-200%+ gains?

    Thank you.

    Comment by Jun | November 26, 2010 | Reply

    • Jun,
      The problem with FDC is that its market float is not very large. It is not as well covered by analysts as FLI which makes up the bulk of its earnings. FDC is a value stock. If you are prepared to hold it over a period of one year, you’ll probably see some closing up of the undervaluation.

      Comment by Gus Cosio | November 26, 2010 | Reply

      • Yes sir. Thank you.

        So, the placement/offer of shares being planned by FDC would in effect, increase the float. And as such, more people would be enticed to join? Just like what happened to SMDC?

        Comment by Jun | November 26, 2010

    • Parang this research was done by kim go….who is an avid fan of FDC, i agree on valuation but obviously no public participation??

      Comment by mike | November 29, 2010 | Reply

  4. Good day Sir,

    How about LPZ? I currently have paper losses with this stock, though I’m convinced of it’s good business portfolio the stock has been diving downwards. And there is this “quasi-reorganization” I’ve been hearing about the stock. Anyways Sir, I’m looking forward for your insights. Thank you.

    Comment by KennyV | November 26, 2010 | Reply

    • the quasi reorganization is just an accounting step to eliminate deficit in the balance sheet. eliminating the deficit would bring them closer to their target of distributing dividends next year.

      technicals of LPZ is not looking good – it seems it’s forming a rounding top.

      with regards to fundamentals, my knowledge is very limited.

      Comment by oliver mia | November 26, 2010 | Reply

  5. Sir any insight on my portfoli, URC, ICT, MPI, AP. My total paper loss is already almost 10%. Thank you sir especially helping us newbie.

    Comment by jaayem | November 26, 2010 | Reply

    • 10% loss is very manageable.

      if you are trading based on fundamentals, follow sir gus all the way.

      if you want to be a technician / chartist, there are a couple of good person / institution offering seminars for a fee.

      Comment by oliver mia | November 26, 2010 | Reply

    • You may have bought these stocks at a high price… but be patient with MPI and AP…

      Comment by Perocho | November 26, 2010 | Reply

    • Jaayem,
      AP, MPI and URC are fine with me. I’m not quite sure about ICT. I do not have much information about it.

      Comment by Gus Cosio | November 26, 2010 | Reply

  6. sir, i heard that they wont be pushing thru with the 2po, instead just secure a loan for their 2011 projects

    Comment by A.J. | November 26, 2010 | Reply

    • I heard SLI will be pushing thru with the follow on offering although they did not give guidance as to the price range and date. They mentioned it during the stockholders’ meeting today.

      Comment by marts | November 26, 2010 | Reply

      • Hi A.J! Based on the information’s I’ve heard the 2PO will not pursue, they secured a loan to finance they’re projects instead.Fyi.

        Comment by Blogspot | November 27, 2010

  7. Staying tough!!!! Bring it on Market!! When next week comes after thanksgiving break of foreign investors! It’s gonna boom all the way up!

    Comment by War | November 26, 2010 | Reply

  8. Hi Sir Gus, what’s your take on SMB?It went downhill the past couple of days, do you think it can recover or it will continue its downward course?Thanks…

    Comment by adie | November 26, 2010 | Reply

    • The problem with SMB and SMC is that it’s too obvious that someone is trying to prop up the price. What’s happening essentially, especially in a low volume environment, is that as soon that initial burst of investment is plugged in at the start of the session the value drops immediately. Just compare the highs of each session to its close.

      In other words, there’s a bunch of speculators playing with the said stocks and profiting from the obvious play on SMB/SMC. But once the volume picks up, the rise should be more sustainable.

      Comment by Mars | November 27, 2010 | Reply

  9. I wud like to thank you for the one liner you wrote re SMC and PCOR .I took the cue and invested in both and the rest is history.I would like to believe that PAL is worth more than its current price vis a vis CEB.

    Comment by jack | November 26, 2010 | Reply

  10. well, it seemed as if i unloaded my guns too early. re-bought mpi@3.88, DMC@35, edc@5.55 last week or so ago..

    on other news mer has come down to 175.. its close to being a compelling buy. A few peso less and perhaps I’ll buy that instead of DGTL, TEL, or VLL..

    Comment by jasper | November 26, 2010 | Reply

    • I’m cheering you on, Jasper.

      Comment by Gus Cosio | November 29, 2010 | Reply

  11. Sir, how about PX, FLI and MPI?

    Comment by Mark | November 26, 2010 | Reply

    • Mark,
      These are all good stocks. I suggest that you accumulates slowly during this period of consolidation.

      Comment by Gus Cosio | November 29, 2010 | Reply

  12. What are your insights on IP? I’ve incurred as much as 12% paper loss on this stock. I am hoping that it could regain some lost grounds once it’s subsidiary CLOUD is listed on the bourse.

    Comment by AbysmalSpecter | November 26, 2010 | Reply

    • IP unfortunately was unable to hold at its support level. I don’t like making this kind of statements but I think it can drop to as low as 1.36 (10-12% drop) before it settles down.

      Comment by Mars | November 27, 2010 | Reply

  13. Sir,
    Is VLL already a good buy or do i wait for it to go down? Also, do I sell my PCOR shares already or do io hold on to it?

    Comment by Allen | November 26, 2010 | Reply

    • PCOR’s rise has everything to do with the shutting of the FPIC pipeline. It cripples the 2 (Shell and Chevron) of the big 3 gas companies. As long as the Supreme Court keeps it shut then PCOR is a buy.

      Comment by Mars | November 27, 2010 | Reply

      • If i may add, although PCOR had alreday climbed significally from 7 to ~12, i think the stock is getting stronger based on price action last friday. Not like last wednesday and thursday’s weak closing which to me was a sign of speculator’s play.

        As long as i see it strong, i will hold my PCOR or sell at rally then buyback at retracement.

        Comment by Aldrien | November 28, 2010

  14. Hi Sir Gus,

    Good Day!

    May I ask what book’s can you suggest for someone new in stock market? Thanks!

    Comment by Forth | November 26, 2010 | Reply

  15. Sir Gus,
    I am fully invested in JGS in the past month and a half and it seems that no good news on profits, nor CEB IPO, nor long consolidation, can lift the price up. And now it’s undergoing heavy selling. What can we expect from this stock?

    Comment by Glenn | November 26, 2010 | Reply

    • Glenn,
      I like both JGS and CEB. I have a wide threshold on both. I will be willing to buy more of JGS at 22 or below. I have enough in position on CEB already.

      Comment by Gus Cosio | November 29, 2010 | Reply

  16. Hello Gus,

    I was wondering what your thoughts were on UBP. Single digit PE and very good corporate earnings and yet this stock has been traded down recently. Any thoughts?

    Norman

    Comment by Norman Go | November 26, 2010 | Reply

    • Norman,
      You seem to be a long run follower of UBP. Yes UBP is a value stock though a slow mover. This is a good portfolio item but not for short term trades. I suggest you accumulate if you like it since our market is still in bullish stages.

      Comment by Gus Cosio | November 29, 2010 | Reply

  17. VLL: It will pick up once volume picks up (middle of next week). As for when to buy .. I personally think it can still dip between 3.05 and 3.1. But it’s not a dip worth waiting for because once it climbs it’s gonna climb hard.

    DGTL: It is currently at its strongest support level. That’s not necessarily a good thing. It may go as low as 1.37-1.4 before it picks up.

    NIKL: I’d peg its support at 16.5. It’s current price is just an an effect of low volume.

    I am actually disappointed at PSE the last 2 days. It shows to me that there’s not much appetite for risk without foreign support. But I’m sticking with my December bullish run prediction. 🙂

    Comment by Mars | November 26, 2010 | Reply

    • nickel asia recently paid 70m usd to the orig stock holders i think from the proceeds of IPO if you take that away from the market valuation of this stock i heard the 15 ipo price down to 5 pesos? any comments sir?

      Comment by mike | November 26, 2010 | Reply

      • that’s too much mr. mike. from 15 to 5? no one will sell at that price. I agree with mr. gus. holders of nickel is waiting for a higher price to sell. and consider the volume, it is significantly low compared to the previous days which means most of them are just waiting for a higher price to take profit..

        Comment by Francis | November 27, 2010

      • I don’t get it. Whatever Nickel Asia decides to do with the proceeds of the IPO has nothing to do with the value of the stock (unless of course they dropped it down the drain or something in which case the total assets of the company drops and so does its value). If it’s just to pay a debt then it should have zero impact.

        Comment by Mars | November 27, 2010

  18. Good Day Sir! I’m an avid follower of your blog and I was just wondering if you any insights on PX because I’ve been holding this stock since I bought it at 16.04 and I tried to average down but now it got worse and it just keeps going sideways. Should I cut my losses now and shift to another stock like VLL? Hoping for your advice!

    Comment by Adrian | November 26, 2010 | Reply

    • Adrian,
      If you bought PX for a trading buy, it is too late to cut. If you bought it because you want an exposure on the mining sector going into next year, I suggest you pick a point to average down. I think the strong support of PX is around 13.50.
      VLL on the other hand is now sitting just above support, and any new buying could push this stock back to 3.30. I think the stock is worth closer to 4 because at 3.30, it is only 0.7X book value which is quite cheap fora property company.

      Comment by Gus Cosio | November 29, 2010 | Reply

  19. What about MER sir? It is currently priced at 175 and falling. Should we stock up or wait for the price to fall below 170?

    Comment by Anino | November 26, 2010 | Reply

  20. Giving it as cash dividends IS like dropping it down the drain.

    Comment by luke | November 27, 2010 | Reply

  21. Sir GUS,

    I’ve heard that SLI’s 2PO will not pursue since it has already secured a loan to finance its projects for 2011, they say that this would give a better outcome rather than the planned SRO.What is your take on this Sir? SLI the past 2 days was in a bullish run..

    Comment by Blogspot | November 27, 2010 | Reply

  22. Sir!

    I attended your seminar last Friday, I’m no longer a scared investor hehehehehe. More power!

    Regards,
    Sam

    Comment by Scared Investor | November 27, 2010 | Reply

  23. Sir Gus,
    What is your thought on MPI? do you think it will rise before year end? I believe on this company and like their fundamentals.What I don’t like is the price keeps on dropping.

    Comment by Mikayla | November 27, 2010 | Reply

  24. Sir,
    Any thoughts on DMC. Has been NFS for the last 1.5 weeks and not being talked about lately.

    Comment by Mark Anthony | November 27, 2010 | Reply

    • That’s fine… There’s still a lot of profit takers around. Just hold on to it or buy some more to average down your position.

      Cheers! 🙂

      Comment by PoGGs | November 28, 2010 | Reply

  25. Sir Gus,

    ORE’s 3rd quarter report stated that their shipment at Narra, Palawan site is moved to 1Q11 due to heavy rains. Looks like our hope for a December shipment was really dampened.

    Can your contacts help confirm this? I am now skeptically holding.

    Comment by chris | November 28, 2010 | Reply

  26. What is your take on PX and FLI?

    Comment by Allen | November 28, 2010 | Reply

  27. Hi Sir Gus

    It seems that ORE’s first shipment was pushed to the 1st Q according to their latest quarterly report..will you still keep your position on this?

    Thanks!

    Comment by James T. | November 28, 2010 | Reply

    • James,
      Honestly, I am considering paring down my position though I will not sell it down completely. It still has good prospects. I just want to control my risk.

      Comment by Gus Cosio | November 29, 2010 | Reply

    • push to q1? why? baka walang namina……….baka HAO SIAO

      Comment by mike | November 29, 2010 | Reply

  28. Hi Sir Gus! I’ve been following your blog for a while and have gotten some insights from your discussions. Like you, I am a long-term investor and think of stock markets as a way to invest in well-run companies in the country.

    I would like to know if there are strong enforcement of insider trading rules in the country and which agency actually implements these rules. Currently, Wall Street hedge funds and companies like Goldman Sachs are being investigated for that. In the Philippines, I am not sure if the divide between investment banking and trading is strictly followed at all. If insider trading is rampant here, then the credibility of our stock market would always be questioned which would scare away foreign funds.

    Comment by Alvin | November 28, 2010 | Reply

  29. gud morning sir gus, i curently hold the ff with average of edc 6. mpi 5.50, mer 243. when do u think these will go back up again.

    Comment by gerald | November 29, 2010 | Reply

    • Gerald,
      I think EDC will go down to 5.30 before it goes back to 6; although it will get there some months down the road. MPI is very strong around the 3.70 – 3.80 level. MER, I think, will see very strong support at 170.

      Comment by Gus Cosio | November 29, 2010 | Reply

  30. Hi Sir,
    can I have your email address? I would just to exchange information. Also, was PX a good buy @ 14.02?

    Comment by Allen | November 29, 2010 | Reply

  31. you drive by New Manila area everyday? i’m just across the street where the Vista’s mid rise project is hehe
    The roof of the main entrance is almost done 🙂

    Comment by jamezu | November 29, 2010 | Reply

  32. Hi sir gus!

    What is your take on ACR? Would you buy this? Seems speculative but after going thru it’s annual and quarterly reports, the company is not a shell and really have operations and income.

    just want to have the opinion of the master. 🙂

    More power!

    Comment by ricky | November 30, 2010 | Reply

  33. Sir Gus,

    What do you think of DMC? What is its support? Thank you.

    Comment by Nel Valle | November 30, 2010 | Reply

  34. Hi sir Gus. ORE’s maiden shipment reset to 1st quarter of 2011. Reason cited was rainy weather. Your thoughts on this please? You hinted on some reservations if shipment does not push through before Christmas.

    Comment by Jojo | November 30, 2010 | Reply

    • The gold is already there and the only problem was not ship on december. For me, i don’t see that as a big problem. You can actually compute the revenue of ORE by the tons of gold.lol

      Comment by joppy gwapo | November 30, 2010 | Reply

      • Isn’t ORE mining for Nickel & not Gold?

        Comment by sdrobob | November 30, 2010

      • g’day sirs,
        am just thinking that the mines ready for shipment is really soaked in rainwater but this won’t comfort my nervous feelings that my investment here is going down… what’s really the effect of rains in the delivery? remember, our country has only 2 seasons, it’s WET and dry. I presume they had considered this before declaring a shipment date. Correct me please…

        Comment by blooddee | November 30, 2010


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