Happy Monday, Barkada --
The PSE lost 53 points to 6195 ▼0.8%
Thank you to
arkitrader for all the good morning vibes, and to /@mmayfield for taking interest in the
MB Crony index (composition
here), and to /@mingshu for their question about EMI's dual listing (see more on that below).
Shout-outs to Ian Dy, Makisig Tan, Stephen Chiong, Ronald Bagawisan, Dividend Pinoy | PGG, Just’n, psestocktipsdaily, meloi, Lance Nazal, Jose Mateo, Rolex Jodieres, Chip Sillesa, leaf, arkitrader, and Jing for the retweets, and to Marvin Rodriguez Gonzaga, Evolves.co, and Mike Ting for the FB shares!
- Dito Telecommunity has 10.3 million subscribers
- Apollo Global to make shitcoin based on its iron ore production?
- Q&A: Will EMI's PSE and SGX prices always be the same?
- PLUS: Quick takes on VREIT, KPPI, and ACEX
▌Top 3 MB indices:
Code:
MiddleClass ▲1.72%
Fast Food ▲1.48%
Power Gen. ▲0.64%
▌Bottom 3 MB indices:
Code:
Crony ▼5.71%
Hedgy Metal ▼4.49%
Logistics ▼3.03%
▌Main stories covered:
- [NEWS] Dito Telecommunity has 10.3 million subscribers, now “running” (not “crawling”)... Dito Telecommunity [DITO 4.14 ▼1.19%] [link] said that it has transitioned from targeting a one-third market share of the Philippine mobile market, to aiming to be “number 1”. Dito Tel’s Chief Administrative Officer, Adel Tamano, said that Dito Tel is no longer “crawling”, but instead has transitioned from “walking to running”. Mr. Tamano didn’t say what metrics Dito Tel was using internally to make this metaphor, but he did mention that Dito Tel’s subscriber count stood at 10.3 million, and that the company would “definitely hit the 12 million [mark] by the end of the year”. Mr. Tamano said that Dito Tel’s main competitors, Globe [GLO 2270.00 ▼1.05%] and SMART [TEL 1691.00 ▼0.53%], are “not making it easy for [Dito Tel]”. He noted that both GLO and TEL have more money, deployed assets, and experience in the market, but said the fact the incumbent telco operators are copying Dito Tel’s pricing plans means that Dito Tel has a “superior product” and that they “treat the customer more fairly”. Dito Tel’s 10.3 million subscribers currently account for just 5% of the market in the Philippines, and 9% of the data usage market.
- MB: It’s simply a fact that 10.3 million subscribers is a serious number. But from a business perspective, the world is full of companies that burnt through investor money to acquire a huge pile of users, only to fail at turning that pile of users into a profitable business. There are some high-profile examples of companies that successfully transitioned from “blitzscaling” (prioritizing user growth over all else) to mature profitability, but almost all of those companies are in tech, like Facebook, Netflix, and Google, and the commonality between all of those companies was that it didn’t cost a lot of money to add new users (not really an infra-based business), and that adding new users actually made the “network” better. DITO faces the opposite problem: adding new users costs it immense piles of money, which is basically just debt, and as GLO and TEL have demonstrated so painfully over the years, each new customer drags on the performance of the overall network. We haven’t even talked about Dito Tel’s profitability yet, which is like the final boss fight of challenges facing Dito Tel right now. DITO shareholders don’t think it’s especially cool that GLO and TEL have copied Dito Tel’s pricing to prevent Dito Tel from growing; that’s the kind of thing that the government or the Department of Information and Communications Technology (DICT) should care about. Dito Tel isn’t the government; it’s a for-profit public company that is trying to snatch up market share in one of the most competitive and challenger-adverse industries on the planet, from two of the best-funded conglomerates in the country. As a consumer of mobile services, I wish them luck: the better they do, the better my overall service will be. As a shareholder, though, I’m looking at the charts, looking at that market share, and I’m waiting to hear the plan; not a vision board about what the company hopes to be in 5/10/15 years, but a plan for what it is doing this week, and what it will do this month and this year to grow the business into a profitable and sustainable enterprise.
- [NEWS] Apollo Global to make shitcoin based on its iron ore production?... Bilyonaryo reports that an associate company to Apollo Global Capital [APL 0.04 unch] [link], one of its equipment partners, is investigating the use of a cryptocurrency called FerroCOIN to raise money to build processing plants for the magnetite iron ore that could, one day, be mined by APL’s offshore mining rig, the MB Siphon 1 (no relation). According to Bilyonaryo, the FerroCOIN project is led by Bernadette Herrera Dy, who is the chairperson of the associate equipment partner, and also a director of APL. While the FerroCOIN website (ferrocoin.io) is dead/unresponsive, a Google Image Search for “ferro coin bernadette” turns up several thumbnail pictures of Ms. Dy from the ferrocoin.io website. According to cached text, FerroCOIN bills itself as the “1st secured token backed by mineral assets and underlying fundamental mining operations”.
- MB: Absent a disclosure by APL that ties FerroCOIN directly to the company, it’s pretty difficult to say whether this is just some abandoned piece of boardroom pillow-talk that never gained the momentum to get properly developed, or whether this is an actual fundraising option that APL is actively pursuing. Keen-eyed Barkadans will notice a flaw in the plan right away, which is that it’s hard to securitize a token with “fundamental mining operations” when no such mining operations have taken place. While there is a Twitter account that was made for FerroCOIN back in December of 2017 (one of the page’s 6 followers is Ms. Dy’s relative, Mr. Alexis Herrera), neither the @ferrocoin account nor the @alexisrcherrera account that followed it have shown any activity. I think it would take a serious set of iron ones to mint a token in this crypto-hostile environment, so maybe maybe they could explore running a ship-based offshore casino instead? (Somewhere, Enrique Razon’s eyes just popped open, waking him from a comfortable Monday morning sleep.) Perhaps they could fit the ship with solar panels and pursue a no-revenue RE IPO? Joke lang, joke lang. It’s probably best to just wait for APL to say what’s going on.
- [Q&A] Will EMI's PSE and SGX prices always be the same?... In theory, yes. The shares of Emperador [EMI 18.40 ▲1.66%] that are listed on the Philippine Stock Exchange (PSE) are the same as the shares of EMI that are listed on the Singapore Exchange (SGX), in that each share represents the same 1/15,736,471,238th claim over EMI’s assets, same right to participation in dividends (if any), and same voting power/proportion with respect to shareholder votes. So, at least academically, and excluding foreign currency exchange, we’d expect that there’d be absolutely no difference at all between the stock prices of EMI on the PSE and the SGX. That said, in practice, there’s nothing mechanical or automatic that actually works to insure that the prices are the same. Both the price on the PSE and the price on the SGX are set at the point where the bid last matched the ask. Just supply and demand.
- MB: So far, the price of EMI in Singapore is tracking nearly perfectly to the price of EMI in the Philippines, as we’d expect for a secondary/dual listing like this. The real-time fluctuations in the exchange rate between the Singapore Dollar and the Philippine Peso can lead to some price differences, but at present rates, the SGX price is only 0.5% higher than the PSE price. There are some traders that operate on a scale that would make it possible to earn a reasonable return on trading this potential differential. This is called arbitrage trading, but it’s usually only financially viable when using huge sums of money to chase those little differences. Pesky transaction costs like trading commissions and currency exchange spreads usually restrict arbitrage trades to the fat cats. But the fact that these differences can be monetized help keep the prices in lock-step.
- [NOTES] Quick takes from around the market...
- VistaREIT [VREIT 1.73 ▼1.70%] [link] stab fund closes as VREIT slips beneath its IPO offer price. The fund, headed by China Bank Securities [CHIB 26.85 unch], bought over 103 million shares, using about half of the stab fund’s money. The shares purchased will be returned to the selling shareholders (various Villar-led corporations), and the public float level will be adjusted to 35.29% since the shares re-purchased by the Villar-controlled companies do not count as publicly-owned due to the family’s control over those corporations. It’s a tough time to go it alone. Let’s see what happens this week.
- Kepwealth [KPPI 2.26 ▼22.07%] [link] files an “[emergency]” disclosure to let us know that it’s still not doing anything with its IPO proceeds due to “the pandemic”. At some point, the company is going to have to come out of hibernation and actually put the money that it raised from the public to use. It feels like KPPI is trying to remain unknowing of all the opportunities that could be growing out of this prolonged crisis. The stock is down 24% YTD, down 55% from its March COVID Crash lows, and down 73% from its pre-COVID trading range. Let’s not even talk about where it’s at relative to its all-time high!
- ACE Enexor [ACEX 13.30 unch] [link] is up over 66% in the past month, the top-performing stock on the PSE during that period. The surge comes after a painful 81% drop from its early-January highs. Not sure the cause of the pump, but could it have something to do with its ex-board member being appointed to lead the Department of Energy? Is this a crony/regulatory capture bounce? Either way, ACEX would need to climb 215% from here to get back to those past highs. Not easy.
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