Happy Tuesday, Barkada --
The PSE gained 24 points to 6506 ▲0.4%
Thanks to PSE Noob Trader for the observation that a lot of retail volume probably left to crypto and never came back (I think there's some truth to that), to Jing for reminding me of my DDMPR bags, and to G, John, /@deloris, /@faithtees, /@skytheoden83, and /@kprw16 for your passionate commentary on COL Financial's outdated trading platform.
I hope that COL is reading what you are saying, taking notes, and starting the real work of making substantial changes. Your comments are very representative of what I hear every day from new traders asking about which brokerages to use.
Shout-outs to Lance Nazal, avenmicjohn, Kayzee25Maine, cristinaorlina, LanAustria, danmikeel, Dividend Pinoy | PGG, mjbachao, Justn, Cathay Pacific Boarding Music is enchanting, CHARToons, Evolves Capital, Inc., KingArk, arkitrader, Rolex Jodieres, meloi, Palaboy Trader, Chip Sillesa, Reynold, Pao, CookyTitaCookie, Retweeter, and Jing for the retweets, Jayvee Menil, Genesis Umali, Evolves.co, and Mike Ting.
▌In today's MB:
- ACEN FY22 profit up 90%
- CTS Global had a brutal Q4
- Alternergy's stab fund 75% depleted
- PLDT cleans house
- DITO CME loses ₱25.6-B in FY22
- Chelsea loses ₱2.5-B in FY22
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▌Main stories covered:
- [FY22] ACEN FY22 net profit up 90% to ₱14.6-B... ACEN [ACEN 6.21 ▲2.5%; 150% avgVol] [link] disclosed a FY22 net income of ₱14.6 billion, up 90% from FY21, on ₱35.2 billion in gross revenues. ACEN said that revenues from the sale of electricity were up 35% to ₱35 billion, driven mostly by the contributions of new facilities and higher spot electricity prices. ACEN also reported that its cost of the sale of electricity was up 59% to ₱34 billion, due to the high spot electricity prices it had to pay during the “major preventative maintenance” of its SLTEC thermal plant in Q1. The company ended 2022 with 3.9 gigawatts (GW) in “attributable capacity”, with 98% of that capacity from renewable sources. ACEN has since increased its capacity to 4.0 GW in March of this year, but that event falls outside of the scope of this annual report. ACEN said that it is on-track to achieve its goal of 20 GW of capacity by 2030. ACEN is a subsidiary of Ayala Corp [AC 655.00 ▲4.0%; 150% avgVol], and is the Zobel Family’s (mostly) renewable energy power generation company.
- MB: Put plainly, 2023 has sucked for ACEN shareholders so far, as they’ve seen the stock’s price plummet from a high of ₱8.37/share in the first trading days of the year, to Friday’s close of ₱6.06/share. That’s a 27% drop. Sure, higher interest rates hit capex-heavy firms the hardest by making their projects less profitable, but ACEN’s peers don’t demonstrate the same steep price drop. Perhaps it was just ACEN’s stock price coming back to reality, as it carried an elevated price-to-earnings ratio for years heading into 2023. I don’t know for certain. But I do know this: as the market becomes more saturated with renewable energy companies and the industry itself matures into a wide portfolio of operating facilities, one of the key differentiators will be facility uptime. As this report shows, the pain of having to fill generation gaps with elevated spot electricity prices is not something to be ignored. Sure, maybe it’s easier to ignore in the growth phase of the industry when companies like ACEN are growing so fast the numbers can get easily lost in the mix, but as ACEN’s portfolio grows, the impact of each new project will be smaller and smaller on the company’s financial fortunes. The efficient operation of an installed base of facilities will be what wins the day.
- [FY22] CTS Global finishes 2022 with a brutal Q4... CTS Global [CTS 0.89 ▲1.1%; 100% avgVol] [link], the Lee Family’s proprietary trading firm, disclosed a full-year net income of ₱52.2 million, which was up 159% from its FY21 net income of ₱20.1 million. Considering that CTS entered Q4 with ₱70.8 million in accumulated net income for the year, the ₱52.2 million in year-end net profit implies an ₱18.6 million net loss in Q4. On a full-year basis, CTS reported that global trading revenue was down 84%, local trading revenue was down 62%, and total revenues were down 34%. In terms of the investments that CTS made, it said that it “capitalized on the commodities run” by pushing funds into the Indonesian market, but also said that it ended FY22 having put ₱1.275 billion into low-yield fixed-income securities (mostly government bonds). This amount is 94% of the net capital raised by CTS’s IPO. Over 45% of its FY22 revenue came from the interest off of its fixed-income investments and other non-equity positions. CTS turned a larger profit this year because it was able to pay 46% less in commissions. That saved CTS over ₱22 million as compared to FY21.
- MB: So the main selling point of the CTS IPO was, paraphrased, “give us your money and we’ll grow the international trade business and we’ll split the profits”, but it seems like they left out the part where they’d only do it if the markets were going up. To me, the problem with CTS as an investment is that it is basically a black box; if something goes wrong, as it did in Q4, what analysis can CTS provide about the approach that it used and how it will do better in the future? CTS has no trading thesis. It has self-referential goals, like to expand its international trading desk, but even that move into Indonesia wasn’t part of the original sales pitch. That was a surprise. All we know is that it struggles to make trading gains when the PSE isn’t pumping, when there’s inflation, and when rates are high. The only way FY22 could have been worse for CTS is if interest rates somehow didn’t go up; then its low-risk government bonds wouldn’t have paid out so handsomely.
- [NOTES] Quick takes from around the market...
- Alternergy [ALTER 2.84 unch; 56% avgVol] [link] stability report reveals that the fresh IPO’s stabilization fund agent “spent” another 26.4 million shares last week to bring its total usage to around 86 million of the 115 million shares in the quota. The stabilization fund is 75% depleted, with one week left to go in the fund’s lifespan.
- MB Quick Take: ALTER has struggled to punch through the resistance of its IPO price, but the stabilization fund’s spend has been fairly consistent and it has about 25% left to spend during the last 25% of its life.
- PLDT [TEL 1284.00 ▲1.9%; 2341% avgVol] [link] announced a substantial list of departing executives as a result of the damaging capex overrun fiasco discovered in December of 2022. TEL disclosed that its Chief Procurement Officer voluntarily resigned, while its CFO and Network Head availed of “early retirement”. A vice president availed of TEL’s manpower reduction program, and another vice president voluntarily resigned. TEL did not announce any appointments to fill these vacant positions.
- MB Quick Take: That capex mess was too big for there to be no consequences. The explanations that TEL has provided (so far) have been so vague and unsatisfying that the only answer seemed to be that it was a personnel issue. These are huge changes. The CFO role in particular, due to its intimacy, is a difficult one to replace quickly. Maybe TEL can make an opportunity out of this crisis and come out the other side with a leaner, meaner executive core.
- DITO CME [DITO 2.70 ▼3.9%; 1463% avgVol] [link] posted a FY22 net loss of ₱25.6 billion, which was 42% worse than its FY21 net loss of ₱17.9 billion. DITO’s losses actually accelerated into Q4; its 9M net loss was ₱14.2 billion, meaning that it lost ₱11.4 billion in Q4 alone. DITO said that its total subscriber count had increased to 15 million, and that its monthly average revenue per user (ARPU) was ₱83. DITO’s foreign exchange losses grew 17% to ₱7.2 billion. DITO’s interest expense grew 324% to ₱5.3 billion. The company said that it plans to conduct a follow-on offering in 2023, and it reported that Udenna Corp (Dennis Uy’s personal holdco) has “committed to provide additional capital” in addition to having its outstanding advances to DITO converted to equity.
- MB Quick Take: While it’s hopeful to see DITO’s ARPU jump 7% q/q, it’s alarming to see its subscriber acquisition rate get chopped in half, from 36% q/q in Q3 to 15% q/q in Q4. To DITO’s credit, it exceeded its 12 million subscriber goal by the end of FY22 by a considerable margin, and it did so while improving ARPU, but my god those currency and debt headwinds are strong. DITO’s stock is down 46% over the past year.
- Chelsea Logistics [C 1.16 ▼0.8%; 7% avgVol] [link] posted a FY22 net loss of ₱2.5 billion, which was actually 35% better than its FY21 net loss of ₱3.9 billion. Chelsea attributed its continuing struggles to the “double blow” of the continued risk of COVID sub variants to disrupt its business, coupled with the high price of fuel as a result of the Russian invasion of Ukraine. Gross revenues were up 44% to ₱6.4 billion on easing restrictions, with gains in all segments. Gross expenses were down 10% as a result of cost control measures.
- MB Quick Take: The last time Chelsea turned a profit was back in 2017, but its losses really accelerated when Dennis Uy changed the company’s name and focus to include catching some of his falling knives. Losing just ₱2.5 billion is a huge improvement, but it’s still a factor of 10 worse than it was back when Chelsea was just a focused logistics company.
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