PLDT shares seen reaching record level

MANILA, Philippines - US-based Citigroup sees the share price of dominant carrier Philippine Long Distance Telephone Co. (PLDT) breaching the P3,000 level despite the impending capital intensive acquisition of GMA Network Inc.

In its company update entitled “Alert: Philweb Stake Sale to Fund Mediaquest Investment, Citi said the investment bank recommends a buy on PLDT as it expects its price to hit P3,050 per share.

“We keep PLDT at buy and the stock remains one our key regional picks. The company remains as a potential beneficiary of market repair with the reduction in the number of market operators,” it added.

Based on its valuations including the recent acquisition made by PLDT of Digital Telecommunications, Citi sees the share price of PLDT hitting P3,050.

“Our valuations include the Digitel business which was recently acquired and factors in the increased number of shares issued to accommodate the deal. Based on this method, we value PLDT at P3,050 per share,” it said.

The shares of PLDT closed at P2,700 per share last July 13.

However, the impending acquisition by PLDT of a controlling stake in GMA that is currently controlled by the Jimenez, Duavit, and Gozon families would be a key concern due to the price tag of between P50 billion and P60 billion.

“Key concern lies with potential for further media acquisitions if PLDT does move to acquire GMA7 and if this is done at a material valuation premium. This may require significant capital investment,” the investment bank said.

PLDT president Manuel Pangilinan earlier disclosed that the dominant carrier would rely mostly on cash to acquire a controlling stake in GMA.

The dominant carrier is hoping that the transaction would be completed within the year but would still depend on negotiations with the Duavit, Jimenez, and Gozon families that control GMA.

Likewise, he added that the transaction would also have to be approved by Congress and the National Telecommunications Commission (NTC).

“The time table is beyond our control because we have to get the approval of both the Congress and the NTC,” he explained.

PLDT’s affiliate MediaQuest Holdings, he said, would most likely acquire GMA’s common shares while PLDT would pick up Philippine Depository Receipts (PDR).

PDRs are a form of equity reserved for foreigners as the Constitution prohibits foreigners from having voting shares in media entities.

PLDT is controlled by Hong Kong’s First Pacific Co. Ltd. and Japan’s NTT DoCoMo but MediaQuest is owned by PLDT’s Beneficial Trust Fund. PLDT’s Mediaquest has acquired a controlling stake in TV5 operated by Associated Broadcasting Corp.

Other risks include the competitive environment particularly in the wireless market that has from time to time been difficult with operators resorting to aggressive price cutting promotions as well as the attempt of the government to impose additional taxes or levies on private operators citing their profitability.