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Stock Commentary

TKC Metals suspension will be lifted today

Merkado Barkada
TKC Metals suspension will be lifted today
It’s one thing to melt metal and produce bars or pipes for export: it’s another thing entirely to build a telecommunications firm from the ground up and compete on price, service, and execution with some of the biggest entrenched interests in the country.
Merkado Barkada

The company’s stock was suspended a week ago after it revealed that T’s [T 0.94] board had voted to sell substantially all of T’s assets, and that the board would seek shareholder approval of the move at a December 30th special shareholders’ meeting.

In a follow-up clarification, T said that it plans to sell its interest in Treasure Steelworks Corporation, Steel International Limited, and Campanilla Mineral Resources, which have been operating at a loss for over four years.

T said that it hopes that a sale would be finalized within a year and that once the transaction is completed, it will have approximately P36 million worth of assets on its balance sheet, including just P4 million in cash.

T said that these sales would “put a stop to incurring continuing losses” and free up the management team to “[pursue] new business ventures instead of worrying about the Company’s losses”. In the short term, T plans to conduct the sale of its steel businesses and undertake feasibility studies of new businesses that it could enter, like “technology”, broadband internet, and renewable energy.

In the medium and long term, T plans to venture into these new business areas by “engaging personnel with reputable experience”, and mentioned specifically an interest in “Prepaid Card Sales”, “Digital Platform” subscriptions, and “Big Data and Analytics” subscriptions. The PSE said that it will lift T’s suspension at 9am today.


MB BOTTOM-LINE

On the one hand, T is just a holding company, and I applaud the board’s decision to simply cut ties with what wasn’t working even if that means literally selling everything of value or significance that the company owns. It hasn’t generated profit for years and years.

The company mentioned the continued weak market for steel in China due to oversupply, and how this extended pandemic has only made those conditions worse. So the writing was on the wall for steel, the board read it, and now the shareholders will get a chance to approve. That’s good. On the other hand, though, this clarification reads like a Christmas list of “cool stuff” that the T board would like to be involved in, but just happens to know nothing about.

Seems like they have the desire to “do business” in a wide variety of cutting-edge stuff, but absolutely no experience in any of it. I’m automatically suspicious of any statements that mention doing such a wide variety of incredibly complicated things.

I’m especially concerned when the statements are made by the board of a failed natural resource holding company, about casually entering hyper-competitive retail-facing service industries. It’s one thing to melt metal and produce bars or pipes for export: it’s another thing entirely to build a telecommunications firm from the ground up and compete on price, service, and execution with some of the biggest entrenched interests in the country.

Just ask “Davao Dennis” Uy. Even with all the backing in the world, these are not easy businesses to enter. Now, maybe T has plans to monetize its shell holding corp as a potential backdoor for a group that has technical ability in one of these areas, but that’s not the tone of this press release.

I’m intrigued about these developments, but not holding my breath.  

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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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