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Stock Commentary

Quick Take: DOF chief replacement rumors and 2 more market updates

Merkado Barkada
Quick Take: DOF chief replacement rumors and 2 more market updates

Department of Finance (DoF) [link] Secretary, Benjamin Diokno, is battling rumors that he is about to be pushed out as leader of the powerful department. Bilyonaryo reported a rumor that Joey Salceda was being prepped to take the helm of the DoF after a few recent developments seemed to show that Mr. Diokno had fallen out of the Administration’s favor. Notably, Mr. Diokno’s ally, Lilia Guillermo, was removed from their spot as the head of the BIR, after stating that she’d comply with the court’s decision on the Marcos Family’s unpaid estate taxes that have ballooned to P203 billion. President Marcos said that he would not like to “change horses midstream”, adding that he thought the Administration had “assembled a great team.”

MB Quick Take: After a very successful stint as BSP Governor, Mr. Diokno’s untouchable status seemed to take a hit when he was forced to walk back several remarks that he made about what the BSP should do with interest rates and open market currency manipulation actions. It’s hard to say whether or not the growing noise surrounding Mr. Diokno is due to some fault of his own, or if he’s just being groomed as a convenient sacrifice for economic problems that, while largely external, are being felt very acutely by the voting public in the form of rising food prices. I don’t have any special information, but it does seem like there might be a fire creating all this smoke.
 

Alternergy [ALTER pre-SEC] [link] said that it has partnered with Shell Overseas 1 Investment B. V. to “explore” a potential P286 billion offshore wind project in Mindoro that could have a capacity of up to 1 gigawatt (1,000 megawatts), at a cost of US $5 million per megawatt. ALTER said that it could take up to five years for the project to even start construction, noting that there are still many permitting issues with LGUs and government agencies that will need to be settled before moving forward. ALTER is the renewable energy company owned by Vince Pérez, the former Secretary of the Department of Energy. ALTER has applied to the PSE to conduct a P2.2 billion IPO.

MB Quick Take: That’s a massive project and a huge price tag. $5m per MW is also a high price to pay, considering that solar power can be developed for around $1m per MW, but there are huge advantages to offshore wind power that might help the project’s business plan once it begins operations. Offshore wind assets are usually more powerful than land-based wind assets, and are generally far more consistent. Wind turbines also generate electricity day and night, not just during the day when the sun is shining in a cloudless sky. Having these kinds of projects on the stove could help boost demand for ALTER’s eventual IPO, should it choose to push forward.
 

Jollibee [JFC 256.0 1.6%] [link] said that the rise of COVID cases in China, and the associated lockdowns, would be a “temporary setback” to JFC’s goal to earn half of its income from foreign-based locations. JFC said that it still plans to open 100 stores in China in 2023, and that it is “well-positioned” to profit from rising inflation as wealthier Chinese consumers switch from fine dining to quick service restaurants, like JFC’s brands, to conserve funds.

MB Quick Take: The new lockdowns in China have the potential to create havoc with companies on the PSE. Some, like JFC, might be positioned in such a way that the lockdowns and inflationary environment could actually be helpful to introduce new consumers to its products, while others, like AgriNurture [ANI 6.7 0.3%], are going to have their product delivery logistics disrupted in unpredictable (and unprofitable) ways. The impacts will be uneven, and any companies that are overly-focused on China could find themselves in a tricky situation depending on how the situation evolves.

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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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