Stock Commentary

Quick Take: UBX spin-off and 5 more market updates

Merkado Barkada
Quick Take: UBX spin-off and 5 more market updates

LT Group [LTG 0.66] [link] teased a FY22 net income attributable of P25.1 billion, up 24% y/y. LTG was quick to attribute some of this performance to FY21’s artificially-low net income due to a one-off accounting treatment of gains relating to PNB’s sale of property. Tobacco accounted for 61% of net income, PNB accounted for 26%, Tanduay Distillers for 6%, Asia Brewery for 3%, and Eton Properties for 1%. LTG noted a 6.3% decline in cigarette sales volume which it attributed to price increases that were implemented to pass on the increased cost of excise taxes to consumers. LTG said liquor sales volume was up 18%. It also said that Eton Properties experienced a 32% drop in net income y/y.

MB Quick Take: This stock is a darling of the dividend investing crowd, and its vice-centric portfolio has been very stable through some relatively choppy periods. Maybe it’s too early to dunk on Eton’s September 2022 “POGOs are back baby!” call, but that y/y performance is just not looking good. Still, this is just a teaser, so I’ll be waiting for the full financials before I draw any final conclusions on what might be happening there.

Aboitiz Equity Ventures [AEV 51.05 2.3%] [link] clarified that its “modular” cold storage initiative is just in its “pilot study or testing phase”, and that “no significant investment or partnerships have been made”. The clarification is in response to an article in Malaya Business Insight that covered AEV’s new “Fresh Depot” cold storage idea, which appears to be focused on getting smaller, mobile cold storage locations closer to farmers to increase yield and prevent wastage.

MB Quick Take: Almost all of the press hits on this initiative have mentioned AEV’s interest in “assisting the government”, which is really shorthand for “obtaining government contracts”. Fresh Depot’s real goal appears to be “mapping” the productive farmland in the provincial outreaches to give the government better data for its centralized planning. That’s not a bad thing, because (according to the BSP) a lot of the price spikes that we’re feeling right now are due to the mismanagement of the food supply chain here, but it is worth noting (for me) that this project probably won’t be scaled and operated like a product with a clear profit/loss motive. There are probably other considerations in play.

SMART [TEL 1310.00 0.8%] [link] announced the sale of another batch of 1,012 cell towers for a total price of P12.1 billion. The buyer is Frontier Tower Associates Philippines Inc., a subsidiary of Pinnacle Towers, a company that has received backing from the American private equity fund, KKR. TEL said that the value of this deal “mirrors” the value established in its previous tower sale deals, and brings the total number of towers sold up to over 7,500, and the total amount raised as part of the initiative to P98 billion.

MB Quick Take: These are sale-leaseback transactions, so SMART (a subsidiary of TEL) is transferring ownership of the sites to Frontier, and then agreeing to lease the use of the sites back from Frontier on a long-term lease. It’s a good deal for both parties. SMART gets a huge cash injection that it can use for anything, plus it doesn’t have to do any of the upkeep and maintenance on the 7,500 sites all across the country. Frontier gets a stable income source that it can either just “have” or spin off into a REIT given the global REIT market’s interest in cell tower holding companies. Would be kind of interesting if we got the chance to invest in something like that locally.

Union Bank [UBP 84.90 0.1%] [link] considering possible sale or spin-off of UBX, a subsidiary “open finance platform” of UBP, to give UBX more freedom to operate outside of the BSP’s regulatory framework that guides UBP and its subsidiaries. Initial reporting said that UBP’s parent company, Aboitiz Equity Ventures [AEV 51.05 2.3%], was the intended acquiring party for UBX, but UBP’s clarification mentioned that the Aboitiz Family is investing both a sale and a possible spin-off to achieve that goal of getting UBX out from under UBP.

MB Quick Take: The family’s reasoning behind the sale/spin-off idea also considers that, as an “open” financial platform, UBX may be more appealing as a potential business partner with other family banks if it is not a formal part of the Aboitiz Family’s bank. It doesn’t hurt to have to reasons for the transaction (less regulation AND more potential business). If it did spin-off, UBX would be the PSE’s first pure fintech investment play. It would also have a sick ticker symbol.

Upson International [UPSON pre-IPO] [link] updated the final number of shares to be sold in the deal to 625,001,000, up 1,000 shares from the original amended amount of 625,000,000.

MB Quick Take: That number is almost upsetting to write. I challenge you. Open up any tab, and try to write it. The extra 1,000 shares is so glaring and cursed, as though LOL purposefully ruined a picture by coloring outside the lines, but just once, such that it’s all you can see when you look at it. Jokes aside, I wonder if the original amended amount was a transcription/encoding error, or if there’s some technical reason why they needed to put another 1,000 primary shares on the pile?

AREIT Inc [AREIT 34.00 8.3%] share price bounced back (mostly) after that crazy Thursday drop. Looks like it was a block sale that was put through late on Thursday that tanked the price so hard.

MB Quick Take: A block sale is a privately-negotiated sale between individuals that happens outside of the usual bid/ask dynamic of the exchange. Think of the PSE as like the Lazada of Philippine stocks: it’s not the seller, it’s just the marketplace. So in this case, someone with a large number of shares wanted to make a quick and easy sale, so they ate a significant discount on the shares to do that. The block sale price isn’t necessarily indicative of the “true value” of AREIT, and could be more about how desperate the seller was to convert the shares to cash than it was about the underlying value of the company.



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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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