Stock Commentary

Quick takes from around the market

Merkado Barkada

November 7, 2023 | 8:45am

1. Chelsea [C 1.32 unch] [link] issued 73,932,000 common shares to Metrobank [MBT 52.35, up 0.7%] and 3,859.000 common shares to the Private Education Retirement Annuity Association (PERAA) as part of C’s plan to prevent default by converting certain outstanding debts into equity. Together, the shares represent 3.42% of C’s post-transaction outstanding shares. The issuance to MBT allowed C to wipe out P221.8 million in debt (~P3.00/share), and the issuance to PERAA allowed C to eliminate P11.6 million in debt (~P3.00/share).

MB quick take: The conversion of the debt to equity eliminates about P16.3 million in annual debt service costs, which is significant for a company that is on pace to lose nearly P900 million this year (based off of a rough extrapolation of its Q2 Quarterly Report). Why did MBT and PERAA “pay” P3.00/share for C stock that is only worth P1.32? As the saying goes: something is better than nothing.

2. PSE [PSE 174.00 unch] [link] reported “NIL” short sales occurred yesterday during the PSE’s launch of its short-selling program. There was no statement from the PSE to provide context to this result, but forums online were filled with reports that brokers were simply not ready to facilitate short-sale trades.

MB quick take: This post from Mike Macainag, Head of Retail Equities at Maybank Securities Philippines, tells the tale. After 27 years of teasing, the SEC and PSE suddenly jumped to life and implemented the short-selling program in a move that surprised traders and brokers alike. Perhaps due to the complexity of the agreements needed in the background to facilitate the borrowing program, or perhaps because of red tape, or confusion caused by poor communication, the PSE was forced to delay the implementation of the program by a few weeks to allow brokers a chance to “catch up”. By what we saw yesterday, brokers still haven’t caught up, and nobody seems to know exactly what is going on. It’s hard to call it a “launch” if the rocket’s engines don’t fire. Even a soft launch is probably too strong of a term to use for what happened yesterday. Still, I’m hopeful that the PSE can iterate and communicate its way through the process. What else can we do?

3. BDO Capital [BDO 130.00, up 1.6%] [link] thinks that there could be three IPOs in 2024, headlined by Maynilad Water Services (compelled to list by law), Citicore Renewable Energy (parent company of Citicore Energy REIT [CREIT 2.54 unch]), and OceanaGold Philippines (also compelled to list by law). BDO noted that rates and market conditions could push all of these IPOs into the latter half of 2024, and acknowledged that, even then, none of the companies listed are actually required to list in 2024 and could potentially push their IPOs off into 2025 or beyond.

MB quick take: The IPO market is grim. The PSE expected 14 IPOs this year, and instead got three. BDO is expecting three next year, but admits that it could be less than that. Out of the three potential IPOs, the Citicore one is the most interesting to me, as the fundraising seems more purposeful and profit-generating than the “compelled to list by law” transactions for Maynilad and OceanaGold. Citicore says they’ll be ready to go, but will they attend the party if Market Conditions is still there, eating all the food and harassing the guests?

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