Vernian Capital on X: Bought FILRT as a Play on the BPO Sector with an Indicative Yield of 10%

Historical Chart, Weekly

Investment Rationale:

1. Assets comprising of 17 fully operational, Grade-A PEZA accredited Office Buildings in Alabang 

and 1 prime beach lot property in Boracay leased to Crimson hotels

2. Attractive dividend yield of 10% at current levels

3. "peak rates" outlook in 2023, policy rates projected to fall in 2024 onwards, making $FILRT yield more attractive

4. Strong BPO sector outlook projected to grow more than 10% per year in the next 5 years

5. Vacancy rate of ~20% is putting pressure on rental income but can be viewed as upside potential should office leasing picks up

6. Given point number 4, we think point 5 should be mitigated with almost 80% of tenants being largely multinational BPO companies

Vernian Capital on X: Bought GDXJ as a Bullish Play on Gold

November is one of gold's strongest month based on the 20-year historical average. If this plays out, we could be testing the multi-year resistance at 2050-2100 levels by then.

Macro backdrop of "flight to safety is also in play".

Technical Pattern: Falling broadening wedge, continuation pattern, bullish to the upside Long $GDXJ at 33.36

Holding Period: 1 to 4 months

Price Target: None, discretionary

Stop Loss: None, discretionary

#XAU #GOLD #GC

Traded Under (3) Special Situations

Source: Vernian Capital on X

1Y, Daily Chart

Investment Thesis: ABS-CBN Corporation (PSE: ABS)

NOTE: THIS WEBSITE HAS NO POLITICAL AFFILIATIONS. THIS IS NOT A POLITICAL POST. WE LIKE ABS SOLELY FOR ITS INVESTMENT MERITS.

Current Market Price: P 23/Share as of Feb-24-2020

Annual Sales: P 40.1 B

Net Income: P 2.1 B

Book Value: P 35.7 B

Current Market Cap: P 19.8 B

Market Position: Dominant, number 1 player in Philippine mass media

Risks: Franchise renewal risk, Rise of social media, mobile phone platforms away from traditional TV

Year 2016 Performance and Portfolio Rebalancing

For the long-time followers of this blog, you would probably know that we are also managing our own personal investment portfolio in the Philippine stock market. We refer to that portfolio as "Filipino Investor Equity Fund" or simply FIEF. So here's an update on our recent trades and our performance since we started investing in the PSE since March 2010.

PERFORMANCE:

We've managed to perform relatively well for the year 2016 despite the index being down for the whole year, we're up +19.36% vs PCOMP's -2.46% as of 30-Nov-16. The performance was mainly driven by our exposure on RSA stocks, i.e. SMC, PCOR, PF in addition to some notable gains from STI and FOOD. We don't really memorize every single trade that made and lost money because we try to look and manage the portfolio as a whole rather than on an individual stock basis but those are the primary drivers on top of our head.

Since inception-wise we are also performing relatively well vs the PCOMP and S&P 500. FIEF's CAGR is +19.31% in the last 6.69 Years vs PCOMP's +11.99% and S&P 500's +9.94% in the same time period. 

We intend to continue our value investment philosophy moving forward.

Performance Summary:

*In computing the Portfolio performance, everytime we add additional capital to the portfolio the accounting treatment is as if the cash was added at the start of the fiscal year. We believe there's a more accurate way of computing the performance than this method but we're sticking to it because it is simple, it's conservative and it makes intuitive sense.

Investment Thesis: Solid Group Inc. (PSE: SGI)

Current Market Price: P 1.29/Share

Annual Sales: P 6.4 B

Net Income: P 486 M

Book Value: P 9.5 B

Current Market Cap: P 2.3 B

5Y Chart

Summary:

1. Very cheap valuations

P/E = 5.64

P/B = 0.24

P/S = 0.29

Dividend Yield = 7.81%

Reader Question: What's your take on $PIP (Pepsi-Cola Products Philippines, Inc.)?

Message from Anonymous to Filipino Investor [Sent on Sep 6, 2016]

Hello, Came across your blog and find some of the articles interesting. It seems you haven't written about an investment idea in a while - last one I can find in March 4, 2015 on AgriNuture. 

Curious to know if you have ever looked at or followed Pepsi? If so would be interested in chatting on the name. 

Best, 

Anonymous

Message from Filipino Investor to Anonymous [Sent on Sep 8, 2016]

Hi Anonymous,

Thank you for your email. Yes, ANI was the last investment idea that we have written in the website but it certainly is not our last. We just happen to have a lot on our plate recently so we were not able to post a complete investment thesis for our readers. :-)

About Pepsi, we are bullish on this stock as it passed our quantitative multifactor model. That said we are a buyer of PIP at current levels [P3.11 per share on Sep 8, 2016].

Note though that our approach to investing is to construct a diversified portfolio of undervalued and fundamentally sound stocks and hold it for as long as the stock still passes our criteria or a more compelling cheaper stock presents itself. That said, we would be buying PIP along with other undervalued stocks and construct portfolio of say about 20 to 25 of them for the Philippines - in essence around 10% of the available stocks listed in the PSE w/c offers around 278 publicly listed companies.

Investment Thesis: AgriNurture, Inc. (PSE: ANI)

Current Market Price: P 1.87 / share

Annual Sales: P 3 B

Net Income: - P 117.6 mm

Book Value: P 2.45 B

Current Market Cap: P 1.15 B

Weekly Price Chart

Reader Question: What's your take on $MWC at these levels?

Hey there, it's always good to here from you ;-)

Here's The View

If I had some cash in my portfolio, I wouldn't mind to start accumulating at current levels. I would also make sure that my sizing is in such a way that when the price continues to drop from my entry point I'll be a happy buyer at lower levels and I can stomach the paper losses of my initial entry.

I came to this view due to the following reasons.

1. $MWC is fundamentally sound stock selling at attractive valuations.

$MWC (Manila Water Co) as Bloomberg describes it is a full service water utility company serving the Philippine Market. 

Though MWC's customer base is mainly in the Metro Manila, the company is also diversifying it's customer base within the country by catering to non-luzon markets such as Cebu and Boracay, on top of this they are also diversifying regionally in the Asean region with specific interest in the countries Vietnam, Indonesia and Myanmar.

That said we can say that MWC is a business with a strong source of income coming from it's cash cow region - Metro Manila with exciting growth prospects in the future to become not just the water-seller in Metro Manila/Philippines but a key player in the Asean region as well. But of course there are risks.

The main concern with MWC right now is the increasing regulatory risks involved on water tariffs. Simply put, there so called "cash cow" region - Metro Manila is being threatened. There is a risk that the price they will sell the water in Metro Manila will be lower hence this could greatly reduce their sales and thereby earnings and thereby the stock price.

So the question here is do you think these concerns is permanent and will cause MWC to go out of business? Or is this just one of those "bumps" along the way? Let's dig in deeper to strengthen our conviction...

Investment Thesis: Took profit on ACR and Re-positioned to ABS and LPZ

I wanted to position myself on $ABS (ABS-CBN Corp) & $LPZ (Lopez Holdings Corp) as a play for the upcoming 2016 presidential and general elections with the extra power shortage play and Bayantel deal catalyst with Globe for $LPZ. The problem is I don't have enough cash sitting around in my COL portfolio and I am not trading with margin so I have to sell some of my open positions.

W/c raises the question, what position in my current portfolio is worth replacing with $ABS and $LPZ?

Giving a quick look at my portfolio my biggest running gain so far is with $ACR (Alsons Consolidated Resources Inc) of around 63% up from my average buying price at 1.2888. This looks like a good contender to sell given that 

1. I've already made decent money on the stock

2. Due to the recent rise, the stock is now trading at 40x PE (hence relatively expensive)

3. Technically, ACR appears to be "spiker" in nature, since I've captured the a huge spike at short time-frame it may be prudent to take some money off the table

The risk here is that due to the strong momentum, $ACR could continue going up, but given the 3 points mentioned above and $ABS and $LPZ are very compelling at current prices due to cheap valuations and having strong fundamentals plus the upcoming catalysts. It is my view that selling $ACR and buying $ABS and $LPZ makes sense.

On top of this, company insiders are also buyers at current levels for $LPZ and $ABS.

Having the above said, I sold my $ACR shares @ 2.1 and realized  a gain of 63% today and used the proceeds plus some dividends accumulated on my other positions to buy $ABS at 37.15 and $LPZ at 5.05.

Valuation Matrix:

**Click to enlarge the charts**

Who's Buying US Treasury Bonds & Notes After FED's QE Tapering?

Interestingly the US Treasury 10Yr Notes are actually going up after the actual QE tapering. W/c raises us the question, so if the FED is "Tapering" or slowing down it's asset purchases hence lesser demand or lesser buying in the system, who's bringing the prices higher?

Checking the charts... and the culprit is....

2Y Daily - US 10Yr Note Future

Does Lopez Holdings Corp (LPZ:PM) own ABS-CBN Corp (ABS:PM) or is it Lopez Inc.?

Happy Easter! Yep it's holy week and I'm spending my time digging in to Philippine stocks and LPZ (Lopez Holdings Corp) caught my eye.

Let me disclose that it was my thinking that LPZ owns some ABS (ABS-CBN Corp) hence the idea of buying ABS cheaper by buying LPZ shares instead came to being. But digging deeper, it appears that LPZ has no ownership in ABS, and that what owns ABS CBN Corp is Lopez Inc. and not Lopez Holdings Corp.

First let's clearly define the three companies mentioned:

1. Lopez Holdings Corporation (LPZ:PM) (formerly Benpres Holdings Corporation) - is a publicly listed holding company incorporated in 1993 by the Lopez family to serve as the holding company for investments in major development sectors such as broadcasting and cable; telecommunications; power generation and distribution; manufacturing and property development.

2. Lopez Inc. - is a private holding company of the Lopez Family which owns 52.6% of Lopez Holdings Corporation.

3. ABS-CBN Corporation (ABS:PM) - is a publicly listed company and the country's largest media conglomerate. It is currently involve in broadcast radio and television as well as cable television (SkyCable, Creative Communications, Inc.), television programming, films, publishing, licensing, and websites

**Note that if you're a retail investor, you can only buy/sell shares of LPZ and ABS but not Lopez Inc.

My concern here is looking at Lopez Holdings Corporation's "portfolio" page in their company website. It says the following:

Investment Idea - German Car Makers + Italy's FIAT

When I started looking at European stocks in the 1st quarter of this year it really surprised how cheap these companies were selling from a valuation stand point. Being a follower of Philippine stocks on the period when we were on the relentless rally towards the 7000-and-beyond levels, the spread between the earnings multiple, price to book, dividend yield etc between PHL and EU stocks to me was just too wide (PHL being expensive and EU being cheap). Now one could argue that PHL was expensive for a reason (potential growth) and EU was cheap for a reason (contracting economy) but that would be subject to an entirely different debate and will most likely end up not really knowing who's right or wrong, so to simplify things let's just take the numbers as they are, what's cheap is cheap and what's expensive is expensive. =)

Having this said, back then I really had the conviction that there is a compelling case for a long term investment on these EU stocks and damn If only I had the access (and capital LOL) to the Europeans stock exchanges I would have bought them right upfront hahaha! :D Anyways, back to the point of this article, here's the analysis I made during 1st quarter this year. 

**Analysis was made on 11-Apr-13.**

We were thinking that we take this recent correction on the European markets to position ourselves on German car-makers, BMW GR, VOW GR, DAI GR and Italy's F IM. See some fundamental and technical reasons below.

Outlook on Debt Ceiling and US Government Shutdown

**Analysis was made on 07-Oct-13.**

Our outlook remains constructive on equities until the end of the year despite Government Shutdown and and Debt Ceiling concerns that is due to be fixed before 17-Oct-13.

This is due to the following reasons.

1. Technicals. SPX is bullish technically and is forming a falling broadening wedge pattern in the 1Y daily chart w/c suggests a continuation of the upside move in the short-term. This bullish outlook will be invalidated if the price breaks the Support of the rising wedge w/c will then turn the technicals bearish. A potential driver of this event happening is when the policy makers in the US don't come up with a deal before 17-Oct-13 to raise it's debt ceiling. However we'd take the opposite bet on this because given that they "own" the decision whether they will default or not and given that the whole world is looking at them the probability that they will decide not to default is higher.

Sell in May and Go Away, Go back in Late September to October

Some thoughts on Index Seasonality (Dow Jones)

Key takeaways:

- The Dow is back where it was 6 Months ago (around April 10 to Present)

- In a 1 Year perspective, it seems Index Seasonality is in play

Dow Jones YTD Chart

 Dow Jones 15Y Seasonal Average

Slowing China: A Monster Under The Bed Story?

Some thoughts on Disappointing China PMI.

If this data really suggests that the worst is yet to come in China then why did the CSI 300 stayed afloat it's Nov/Dec low? And why did  the price today not able to close below yesterdays open? If the markets think that China is going to get "Slower" or even "More Slower" (pun intended) in the future confirmed by the PMI data then a drastic sell-off should have occurred and a Lower Low should have been formed, but this doesn't seem to happen in the price. We think the price action is a confirmation that the Chinese slowdown that the market is thinking (as shown in Financial Media) is already reflected in the price, if not over-reflected.

What Happens to Equities and Bond Prices When There is a Sudden "Spike" in Interest Rates?

**This analysis was done last May 03, 2013 - Before Ben Bernanke's "Tapering".**

This is in relation to Lloyd Blankfein's "Biggest Worry" -  Interest Rate Increases in Parallels to 1994

http://www.bloomberg.com/news/2013-05-02/blankfein-sees-parallels-to-1994-interest-rate-increases.html

"Goldman Sachs Group Inc. Chief Executive Officer Lloyd C. Blankfein warned that the interest- rate environment has parallels to 1994, when a sudden and sharp increase in rates caught many investors off-guard."

___________________________________________________________________

Question: What happens to Equities and Bond prices when there is a sudden hike in interest rates?

Methodology: We've examined the 10Y US Goverment Yields, S&P 500 Index and US Long Bond from 1981 to Present (32 years) and tried to find out what happens to Equity prices and Bond prices when interest rates make a sudden move up a.k.a "Interest rate spikes".

We've identified 5 interest rate spikes between the 32Yperiod.

Investment Thesis: A Call on COL

I've been looking at COL for some time now and as you might already know, COL Financial Group Inc, the leading online stockbroker in the Philippines is actually listed in the PSE. I personally trade with them and I like their trading platform. Having this said, I really had the interest on investing on this company not only because I like it's service and products but also because of the type of business it is in. Since COL is a stock broker, they make money from brokerage commissions. Every time you and I buy or sell stocks they make money.

I have been closely monitoring how much money they make on a daily basis from their online brokerage operations since Nov last year to present, and when I saw this news below it really came to me that COL is really on a very sweet spot in it's brokerage business and it's position in the Equity capital markets in the Philippines.

Security Name	COL Financial Group, Inc.
Date	03/05/2013
Headline	DCL #1976: Press release: "COL's operating performance rebounds..." - 1
Source
Content
Operating profits of leading online stockbroker COL Financial Group Inc. (COL) rebounded during the fourth quarter of 2012. During the last three months of 2012, COL's operating profits jumped by 16.1% to Php50.1 Mil. This brought operating income for the whole of 2012 to Php339.2 Mil. Although still lower by 15.6% compared to the 2011 total of Php401.7 Mil, the drop was much slower than the 19.4% decline registered during the first nine months of the year. Consolidated net income for the full year fell 8.6% to Php305.9 Mil. Profits rebounded as COL benefited from the recovery of trading activity by local investors in the PSE.

The key takeaway of the above news is that COL's operating profit rebounded in the 4th quarter last year. Noting this, when I checked my gathered data since Nov 5, 2012 to Dec 31, 2012 (2/3rds of the 4th quarter) the average commission they get is about PHP 1.6MM per day (I computed the daily commission by multiplying the daily value turnover under COL x 0.25%). As per the article, this was achieved mainly on the increase in trading activity in the 4th quarter accompanied by COL's increase in number of clients amounting to about 46,536 as of end 2012 from only 27,704 last 2011.