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Stock Commentary

Quick Takes: Sale of Uy’s Malampaya shares to Razon Ok’d and 4 more updates

Merkado Barkada
Quick Takes: Sale of Uyâs Malampaya shares to Razon Okâd and 4 more updates

BPI [BPI 92.00 2.79%] [link] and RBank “merger” will result in BPI becoming the country’s second largest bank in terms of lending portfolio size. The Gokongwei Family will receive P25.8 billion in BPI stock in exchange for RBank, and the family will also be entitled to elect one non-family executive member of BPI’s board of directors. Lance Gokongwei said that the family “reviewed our strategic options”, realized that banking was a “scale game”, and that staying in that game would “require additional capital for growth”.

MB Quick Take: The price is about what I estimated on Friday, but the news that the Gokongweis will get one board seat is “new” and at least gives a little more legitimacy to calling this transaction a “merger” instead of just a straight-up acquisition. I think it’s interesting to hear the Gokongweis decided to sell RBank after realizing that it would be yet another massive sponge for the family’s cash. Maybe the extended (and uncertain) recovery of Cebu Pacific [CEB 35.95 2.57%] has caused the family to think more defensively about businesses with a lower risk/reward for huge outlays of fresh capital.
 

CTS Global [CTS 0.85 6.59%] [link] board approved a 1-year delay in the use of the proceeds from its IPO. CTS took P1.38 billion from investors in April, with the intention to apply that capital to foreign markets starting in Q2 of 2022. This vote approves the delay of that use of the money until Q2 of 2023.

MB Quick Take: This is just the latest case of CTS being unfaithful to the representations made in its prospectus. The entire pitch to investors back in Q1 was that CTS would take cash from investors, push that cash to its trading accounts in the US, Japan, and Hong Kong, and use its special trading system to earn huge trading profits. Almost right away, CTS said that it would push the money into the Indonesian stock market instead. Then, a few weeks later, the company announced that it would be parking hundreds of millions of pesos in low-yield government securities while it waited for market conditions to improve. Now, CTS is saying that it will not deploy the capital that it raised in Q2 of 2022 until at least Q2 of 2023. What happened to the startup- and commodity-heavy allure of the Indonesian market? This isn’t the first time a company has made such drastic changes after it has taken investor money; remember when Solar Philippines [SPNEC 1.11 ?4.31%] did its IPO as a non-operational solar project, only to immediately change its approach and use investor money to buy existing projects from its parent company, and then change its business plan so completely so as to prompt the company to change its name? What’s the point of a prospectus if the majority shareholders are able to make such drastic changes immediately after the money is taken from investors? I think that companies should be able to make post-IPO adjustments to adapt to changes in the economic environment, but there needs to be a better mechanism for making these changes that protects minority investors in the early days of an investment. If the ownership group is prohibited from selling its shares for a certain period of time to prevent rug-pulls, why are there no rules in place to prevent bait-and-switch moves like these? The GCash people are coming. We have some housework to do before they arrive.
 

Robinsons Retail Holdings [RRHI 54.45 0.46%] [link] to rebrand Ministop stores to “Uncle John’s”, after the conglomerate’s late founder, John Gokongwei Jr. The stores will serve a signature fried chicken dish, which will be called “Uncle John's Fried Chicken”. A name change was signaled earlier in the year when RRHI acquired Ministop Japan’s 40% stake in a company that owns the Philippine master franchise for the chain of convenience stores. The acquisition gave RRHI a 100% interest in the PH master franchise.

MB Quick Take: Feels like an oddly western name, but the thought that the family could have named the franchise after the 2015 “thriller/romantic comedy”, Uncle John, made me chuckle, so I guess it’s fine. Feels like I need to rename the $1/month tier of my Patreon Page (which was “Ministop Coffee Crew”), but I don’t know how I feel about renaming it the “Uncle John’s Coffee Crew”. Sounds weird!
 

Department of Energy (DoE) [link] approved the sale of Dennis Uy’s stake in the Malampaya gas field, which he owns through the embattled Udenna Corp, to a subsidiary of Enrique Razon’s Prime Infra Capital (Prime Infra). Mr. Razon has applied to the SEC to list 1.93 billion shares of Prime Infra to raise around P28 billion in an October IPO. Terms of the transfer do not appear to be public yet.

MB Quick Take: Just another blow to the short-lived Dennis Uy empire, which (from an optics point of view) appears to be held together by cello tape and packing string. It will be interesting to know the price of the acquisition. It will also be interesting to know if Mr. Razon has delayed pushing the Prime Infra IPO to allow for this deal to mature enough to tantalize potential IPO investors, or if the Prime Infra IPO is just stuck in SEC/PSE scheduling hell for entirely different reasons.
 

Megawide [MWIDE 3.40 5.56%] [link] and its joint venture partners hosted the president at a ground breaking for the first two stations (Ortigas and Shaw Boulevard) in the Metro Manila Subway project. The stations are part of Contract Package 104, worth P18 billion, which the MWIDE JV won and signed back in May. The previous administration had hoped to have the subway system partially operational by 2025, and fully operational by 2027.

MB Quick Take: MWIDE and its Japanese partners are likely eager to start strong and carry some momentum on these two stations, as they’re interested in bidding on (and winning) other stations in the 35-kilometer, 15-station master plan for the Metro Manila Subway system. This is a showy start to a project that will have millions of eyes following its successes and failures. MWIDE's stock is down over 30% over the past month of trading.

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Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.
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.

BANK OF THE PHILIPPINE ISLANDS

MALAMPAYA GAS FIELD

MEGAWIDE CORP.

MINISTOP PHILIPPINES

PHILIPPINE STOCK EXCHANGE

ROBINSONS RETAIL HOLDINGS INC.

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