Quick Take: Inflation is going bananas! and 3 more market updates
Axelum [AXLM 3.32 halt] [link] said that Metro Pacific [MPI 4.15] will have the ability to nominate one director to the AXLM board of directors as part of its purchase of a 35% stake in AXLM, and “representation in board committees''. AXLM said that its founding group of shareholders would still possess a controlling stake in AXLM by “acting in cooperation with each other”, and that the transaction itself would have “any effect on its business, financial condition and operations”. AXLM has been halted since Tuesday’s announcement, and will resume trading this morning at 10:30 AM. AXLM’s last price was P3.32/share.
MB Quick Take: A big reason why this won’t have that big of an impact is that most of the money is going to AXLM’s owners, not to the company itself. Sure, MPI bought some preferred shares, and that P500 million will be for AXLM’s use and the benefit of AXLM’s shareholders, but the remaining P4.82 billion will go directly to the owners who are the selling shareholders in the deal. The amount that MPI bought was just below the 35% threshold that would have required MPI to conduct a tender offer for minority shareholders at that P3.83/share price point, so it looks like they took as big a bite of AXLM as they could without being forced to buy more or take on additional administrative responsibilities.
Global Ferronickel Holdings [FNI 2.59 1.2%] [link] board voted to authorize an increase in FNI’s holdings in Mariveles Harbor Corporation (MHC) from 64% to 88%. The transaction will cost FNI P192 million. According to FNI’s board, this transaction “will give FNI more control on the operation of port.”
MB Quick Take: This one is a little interesting, since you might look at this and wonder what additional control FNI could get by pushing more money into a company that is already its subsidiary. Operationally, for the port itself, FNI owning 64% or 88% makes no difference at all. FNI still controls the operations, and the additional shares/money do nothing to adjust that. The additional shares have a big impact, though, on FNI’s ability to make unilateral adjustments to the articles of incorporation of MHC, which FNI could use to adjust authorized capital stock, take on debt, or make changes to the board of directors, among other things. From that perspective, having a supermajority of shares does give FNI more control “of port”.
Bangko Sentral ng Pilipinas (BSP) [link] Governor Felipe Medalla said that inflation “most likely” peaked in January, but that “of course we can’t rule out another price shock.” Both Mr. Medalla and Ben Diokno, the Secretary of Finance, said earlier that inflation had likely peaked in December. Actual inflation increased significantly in January to 8.7% y/y (relative to January 2022) and 1.7% m/m (relative to previous month).
MB Quick Take: On the one hand, I don’t like that he sounds like just another tito reading the newspaper, reacting to headlines. There’s a casual tone to the quote that makes me nervous. For the January inflation result to be as bad as it was, and to be both that bad and a surprise to the BSP and Department of Finance is what makes me look for more from Mr. Medalla in this regard. What about the BSP’s analysis caused the BSP to think that inflation had gone down in January, when instead it went way up? What blind-spot was revealed by this massive miss? When the President says that the administration's anti-inflation measures maybe haven’t been felt yet, what should we look for (other than the monthly inflation measures) to evaluate whether the measures were effective or not? On the other hand, what’s the guy going to say? “I guess it didn’t peak in December” is maybe all there is to say about it. But that worries me.
RL Commercial REIT [RCR 5.94 1.7%] [link] declared a Q4/22 dividend of P0.0976/share, payable on Feb 28 to shareholders of record as of Feb 20. The dividend has an annualized yield of 6.57% based on the previous closing price, which is 0.41% larger than Q4's pre-dividend annualized yield of 6.56%. Relative to RCR's IPO price, the dividend increased RCR's total stock and dividend return to -0.51%, up from its pre-dividend total return of -1.01%.
MB Quick Take: RCR is only the second REIT to declare its Q4 dividend, but the first to declare a Q4 div that represents an increase over the previous quarter’s dividend. While the increase is not massive, it does represent RCR’s fourth consecutive dividend increase. News is that inflation is causing rental rates to rise, and that the increase might be “sticky” because of the systemic nature of the inflation, but the revelation that the BSP will likely need to continue increasing rates for the near-term and that rates might remain elevated for even longer than previously thought should still act to suppress the valuations of REITs like RCR. The prices have to fall to make the yields competitive with other fixed-income products that are less risky.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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