Happy Thursday, Barkada --
The PSE lost 18 points to 6446 ▼0.3%
Thank you to
Carlos de Guzman for pumping my tires, to
Alex for spotting the typo in yesterday's post where I referred to "December 31, 2023" instead of for 2022, to
Rod Leaf for the meme appreciation, and to /@eccemachina for kicking off a fun discussion of Dennis Uy's record as a crony capitalist, and to /@hoffmanlesa, /@notwhatiwas, and /@madenew1989 for their suggestions on how to improve the content and look of the MB Crypto News section. Thank you all!
Shout-out to
Jing for loving the shout-outs (haha)!
SharePHIL is offering a free webinar today at lunch (12:30) [
zoom reg link] to talk about how to profit from index rebalancing. They're going to have a panel of experts on to talk about it, so if you've ever wondered how the pros play these rebalancing scenarios, click the link, pop in an earbud, and learn while you chew! Sign-up for the zoom link
here.
No trading tomorrow, so I will see you all Monday morning.
Shout-outs to Angelica, Evolves Capital, Inc., mArQo, SE Accounting Solutions Philippines, CHARToons, Dividend Pinoy | PGG, Jonathan Burac, louieboy, arco, KingArk, arkitrader, LanAustria, Lance Nazal, avenmicjohn, Chip Sillesa, Palaboy Trader, meloi, and Jing for the retweets, Froilan Ramos, Marvin Quezon, Jayvee Menil, Genesis Umali, Evolves.co, and Mike Ting.
- BDO Q1 profit up 40%
- DoubleDragon FY22 profit up 15%
- Raslag board approves P1.45-B in loans
- Vista Land FY22 profit up 6%
▌Main stories covered:
- [Q1] BDO Q1 net profit up 40% to ₱16.5-B... BDO Unibank [BDO 129.50 ▲1.3%; 150% avgVol] [link] reported a Q1/23 net profit of ₱16.5 billion, which was up 40% from its Q1/22 net profit of ₱11.7 billion. BDO reported that its net interest income grew 28% y/y to ₱43.4 billion, and that its net interest margin improved to 4.58%, which BDO attributed to the general rise in interest rates. BDO said that its core businesses “continue to deliver broad-based growth”. Gross customers loans increased 8%. Total deposits increased 14%. Both interest and non-interest income was up. BDO did note that its operating expenses were up 17% y/y, but said that this increase was tied to volume-related costs like credit card interchange fees, where the operating expense expands in lockstep with the bank’s anticipated profit from each transaction. BDO’s President and CEO, Nestor Tan, said: “We’re seeing positive signs. However, we’re not yet sure we’re out of the woods because a lot of the factors affecting us are not within our control.“
- MB: What could Mr. Tan possibly be worried about? BDO posted its most profitable year ever in 2022. Not just “since the pandemic”, but “ever”. While this Q1 net income result is down like 3% q/q from BDO’s monstrous Q4/22 net income of ₱17 billion, this is probably the best run of profit that the bank has ever seen. Positive signs? What kind of signs are you waiting for, Mr. Tan? You run a bank that is always subject to external factors that you cannot control, you’re always technically “in the woods” so to speak with respect to interest rates and global conflict, and yet, despite all that, here we are writing about BDO’s incredible performance. Perhaps it’s a bit of necessary PR to make it seem like the banks are struggling alongside the average Filipino with these higher rates and inflation, when it’s actually pretty clear that the environment has been a profit machine for the industry.
- [FY22] DoubleDragon FY22 net income up 15% to ₱12.9-B... DoubleDragon [DD 6.74 ▲2.1%; 70% avgVol] [link] reported a FY22 net income of ₱12.9 billion, up 15% over its FY21 net income of ₱11.3 billion. DD said that consolidated revenues were actually down 11% y/y to ₱14.1 billion. Rental income was down 5% (rental concessions and discounts), hotel revenues were down 17% (lingering quarantine problems and tourism industry generally) , and its unrealized gains from fair market value adjustments of its properties was down 23%. Revenue from real estate sales was up 97% to ₱1.5 billion thanks to construction completion due to lifting restrictions. On a pre-tax basis, DD’s net income was down 26% y/y, and only managed to beat FY21’s net income figure thanks to a ₱4.7 billion income tax benefit related to the “reversal of the tax liability for DDMPR”, DD’s REIT subsidiary.
- MB: Classic good news bad news kind of situation. On the one hand, DD exceeded its previous year’s profitability and posted its highest net income in years, even stretching back into the pre-COVID times. On the other hand, though, are the troubling weaknesses in DD’s rental business, and the shrinking dividend of its REIT subsidiary DDMP [DDMPR 6.74 unch; 276% avgVol]. The commercial leasing market has not yet fully recovered, and the recent data from Leechiu Property Consultants said that vacancies were still “high” at 20%, with the hardest hit areas being Manila Bay, Pasay, and Paranaque, which are basically where DD does its business. On the plus side, Leechiu said that it expects 2023 to be better than 2022, and that it is looking at a POGO rebound that could help rental rates and occupancy in those areas.
- [NEWS] Raslag board votes to ₱1.45-B in new debt to fund Raslag IV solar project... Raslag [ASLAG 1.53 ▼0.7%; 102% avgVol] [link] disclosed that its board of directors voted to approve ₱1.45 billion in new loans from BPI to finance the land acquisition, development, and construction of its Raslag IV Solar Project in Pampanga. Raslag IV is a 35 MW solar project.
- MB: This is a fairly straight-forward disclosure and debt transaction. Going to banks to borrow money is a fundamental part of the power generation business. ASLAG didn’t disclose the rates that it was able to negotiate for these loans, but it would love to have the time to really dig into the project financials to see how the jump in rates affects ASLAG’s anticipated payback period for projects like this. The higher rates do eat away at the profitability of a project when it is financed in this way, but I don’t have a good feel for the magnitude of the bite. Is it just a nibble, or is it a chomp?
- [FY22] Vista Land & Lifescapes FY22 net profit up just 6%... Vista Land & Lifescapes [VLL 1.75 ▲1.2%; 443% avgVol] [link] reported a FY22 net income of ₱7.4 billion, up 6% from its FY21 net income of ₱7.0 billion. The Villar Family’s real estate development arm has two main segments: residential real estate and commercial malls and office space. On the real estate side, VLL reported that real estate income was down 27% to ₱12.8 billion, due to a decrease in completion rate due to pandemic-related issues like extended payment terms, and that interest income was down 28% to ₱1.7 billion due to more home buyers taking bank financing instead of VLL’s various in-house financing options. On the rental income side (malls and offices), VLL reported a 48% jump in income to ₱13.7 billion, mostly due to the full reopening of malls and other public commercial spaces. In a press release, VLL said that its core net income was up 10% to ₱7.7 billion, and that it had started ₱40 billion in projects “across the country”, which was four times higher than the previous year. VLL said that its land acquisitions “remained muted” because it is still trying to maximize its existing landbank.
- MB: This is another “good news bad news” type of event. On the plus side, VLL gets the benefit of the wildly successful reopening of malls and public commercials spaces to boost its rental income, but on the negative side, it’s still feeling the delayed impact of the COVID-19 pandemic in the form of payment extensions that it provided to home buyers that, when combined with some other quarantine-related issues, meant that VLL wasn’t able to recognize as much revenue as it maybe would have expected due to those delayed turnovers. That said, the VLL farm-to-house conversion machine isn’t grinding to a halt by any means; they’re pushing ahead with a raft of new projects to sell to buyers that have simply not stopped buying. I think the trend of buyers shying away from in-house financing is something that VLL shareholders will want to see some creative thinking from management to deal with, as those profits are a pretty tasty cherry on the top of the farm-to-house cake. VLL didn’t elaborate on why they feel like more buyers are opting for bank financing. That discussion might be pretty interesting, and might reveal the next opportunity in the private financing space.
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