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Business

A highway from the West Philippine Sea

EYES WIDE OPEN - Iris Gonzales - The Philippine Star

The plot gets thicker. And perhaps more exciting, at least for stock market pundits.

Market players are now looking more closely at listed oil and gas companies that could possibly benefit from the entry of Davao’s Dennis “DAU” Uy in Malampaya, the crown jewel in the energy sector.

Listed PXP Energy’s shares, for instance, jumped by 22 percent to P7.70 per share on May 21, the day after the Shell Group announced the sale of its 45 percent stake in Malampaya to Uy, on speculations that further exploration in the West Philippine Sea, particularly in the Recto Bank, could finally happen.

The Recto Bank or service contract 72 is just southwest of the Malampaya gas field. A total of three wells have been drilled, two of which have yielded gas. Exploration, which was put on hold since 2014 due to the maritime dispute, had been allowed to resume.

What’s the connection with Uy?

Forum Energy, holder of service contract 72, is 69-percent owned by Pangilinan-led PXP Energy, but Atok-Big Wedge, chaired by tycoon Roberto V. Ongpin and vice-chaired by Uy, has a 20 percent stake in Forum.

The connection is clear and the timing is impeccable. This means SC 72 could benefit from Malampaya’s subsea gas pipeline to Luzon.

That’s a 504-kilometer gas superhighway from the West Philippine Sea to Batangas, equivalent to the driving distance between Manila and Tuguegarao.

“That’s like the NLEX from the West Philippine Sea,” said Kevin Khoe of Traders Apprentice Pilipinas.

Note that this was also one of the reasons why MVP wanted to acquire Malampaya. MVP said before that if SC 72 is finally up and running, they could pipe the gas from the Malampaya facility.

I wouldn’t be surprised if a partnership between the group of Pangilinan’s PXP Energy and DAU happens if it means a rosy future for Forum Energy.

Uy’s Udenna itself is nominated to explore areas 7 and 8 blocks that are within the Recto Bank basin. Area 7 alone is estimated to have 165 million barrels of oil and 3,486 billion cubic feet of gas.

Backdoor listing

It would also make sense if DAU does a backdoor listing for the Malampaya assets into an already listed company.

Atok-Big Wedge is an easy bet since DAU is already vice chairman of the company and it has a 20 percent stake in Forum Energy.

If recent movements in share prices of DAU’s companies and PXP are any indication, then some investors are likewise considering the possibility of this outcome.

Infusing Malampaya assets into a listed company would raise funds for further exploration in Malampaya and nearby areas, and also prop up the value of that listed company.

Would existing investors of a listed company sell their stake? In the market, anything is possible if the price is right.

On the other hand, a reader who identifies himself as a geologist speculates that DAU might partner with the Chinese, which would make it easier for them to explore the West Philippine Sea.

But as I said in my previous column, only DAU knows for sure his plans for Malampaya.

Stock market investors are keeping a close watch, ready to bet their money on the possibility of more exploration activities in the West Philippine Sea and with a gas super highway to boot.

Monde Nissin

Speaking of the stock market, investors are waiting with bated breath for the public listing of Monde Nissin Corp.

It was a long time coming – years and years of waiting – but it’s finally happening on June 1.

The company, a packaged food giant with rapid meat-alternative growth business, received overwhelming interest from global institutional investors and long-only funds, as well as strong demand from Philippines-based investors.

This resulted in an international and domestic book building process that was multiple times oversubscribed, Monde Nissin announced.

There have been several reports on Monde Nissin, but the common thread is the rosy prospects of its Quorn alternative meat business.

“We forecast Quorn Foods will be able to grow its revenue at 16 percent CAGR through 2023,” UBS said in a report on Monde Nissin.

It noted that Monde’s proprietary technology mycoprotein gives the company the edge. Mycoprotein is nutritious, resembles chicken meat, and leaves less carbon footprint compared to livestock production.

Valuation

In terms of valuation, UBS derives an equity valuation forecast range of P299.3 billion to P412.6 billion, using the sum-of-the-parts-methodology comprising two separate businesses, the branded food and Quorn.

At the lower end of UBS’ equity valuation forecast, which is P299.3 billion, the projected price-to-earnings multiple for 2022 is 29.1 times.

Beyond the numbers, Monde Nissin is a consumer foods business with established brands.  This means long-term prospects could only be good not just here, but across the globe.

In French, a monde, meaning “world,” is an orb near the top of a crown. Monde Nissin is certainly a monde to watch out for as it becomes an even bigger player on the world stage.

 

 

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com

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