November 7, 2022 | 09:00
Basic Energy [BSC 0.30 3.39%] [link] tomorrow listing 1.09 billion common shares which were sold by private placement to a long list of individuals and companies in 2007 and 2018. BSC notes that the shares to be listed have all been fully paid. The listing will have no impact on the value and voting power of each share, but it will increase the shares available for trading by 35%.
MB Quick Take: The easiest way to say this is that the 1.09 billion shares were already counted as part of BSC’s “outstanding” shares, but were not yet “registered” and available to be traded on the PSE. When the shares go public tomorrow, it will look like 26% of BSC’s shares are coming out of a post-IPO lockup. These are shares that were bought for P0.25/share, so will any of those shareholders be looking to flip their shares to try and book some of that 20% gain?
Aboitiz Equity Ventures [AEV 57.20 0.35%] [link] the board is voting to supersize its upcoming retail bond issue from 12 billion pesos to 20 billion pesos. AEV raised the amount to take advantage of “strong liquidity in capital markets” and plans to use the proceeds to partially finance its subsidiary’s purchase of GMR-Megawide Cebu Airport Corporation from Megawide [
MB Quick Take: Rates are going up, and they will be going up for a while, so if AEV needs that money to accomplish anything, it’s probably better to sell the bonds now (at current rates) than wait a few month and sell when rates are higher. With all of its plush government connections and investments, AEV probably isn’t suffering from a lack of interesting things to spend its money on right now.
Metrobank [MBT 52.15] [link] Third-quarter profit climbed 77% year-on-year and edged up 3% quarter-on-quarter to 7.8 billion pesos on “loan portfolio expansion, better margins, revenue from healthy commissions, stable operating costs and reduced provisions”. While impressive, this quarter was not MBT’s best since the COVID crisis began, or even the best quarter the bank has had this year. MBT’s net profit in Q3 was about 2% lower than the 8 billion pesos it earned in Q1/22.
MB Quick Take: The reasons correspond to those given by BDO [BDO 127.00 0.16%] to explain its recovery, so I think it’s safe to assume that the banking industry as a whole is likely to see the same significant year-over-year improvements in Q3 and 9M net profit. That said, banks are a follower indicator, and I’ve had many bankers contact me privately (particularly in the retail auto lending and real estate sectors) to say that rising rates are scaring off customers new loans and was causing some of those already locked into bonds to panic. If rates continue to rise significantly over the next two quarters, where will that leave lenders? If rates stay significantly high from this point on through all of next year, what will it do for anyone who has looked to post-COVID growth to take out loans to pay for their new cars and homes? that they purchased in 2021 or early part of 2022? It may take some time for the impact of the rate hike to really show up in bank earnings reports, but I have a feeling we’ll start to see it in the first quarter of 2023.
Universal Robina [URC 126.60 5.68%] [link] Third-quarter profit jumped 19% year-on-year and 19% quarter-on-quarter to 3.2 billion pesos. Revenue rose 32% year-on-year to a quarterly record of 36.8 billion pesos, which the URC attributed to “strong reopening momentum” in the Southeast Asia region. East. UCR said price increases and cost-cutting initiatives helped boost its sales and earnings for the quarter. Sales from URC’s branded consumer goods segment led the way, up 30% in the first nine months of the year compared to 2021, with contributions from the “international” subset of around 50%.
MB Quick Take: While URC’s recovery looks broad and enduring, not only in our own markets but also in those of other countries, it’s hard to ignore that there are serious potential challenges that URC will need to overcome. to keep the party going. Rising commodity prices will eat away at profits. Huge fluctuations in the value of regional currencies against the US dollar could create strange financial results. Changing consumer behavior in response to ever-rising inflation and prices could cause some consumers to “downshift” or change their food spending habits, as was the case during the height of the COVID 2020 lockdown and the resulting episodes of financial insecurity. I’m not saying they’re going to be crushed by whatever’s to come, just that the URC ship is sailing in pretty uncertain waters over which they’ll have very little control.