Eagle Cement [EAGLE 20.75 9.21%] [link] acquisition by San Miguel [SMC 96.20 2.29%] seen as likely to proceed after SMC received notice from the Philippine Competition Commission (PCC) that the transaction “shall not be subject to review”. The PCC did not elaborate, saying only that the implementing rules and regulations of the Philippine Competition Act did not require the PCC to review the EAGLE/SMC transaction. With no PCC review, the only hurdle left is for SMC to conduct a tender offer of EAGLE minority shares at P22.02/share.
MB Quick Take: EAGLE’s steep pump on Friday pushed the price up to P20.75/share, which implies the market’s belief in the probability of the deal going through is about 81%. If the market thought the probability was 100%, then it would buy up shares right to the tender offer price of P22.02, but the fact that the price is still lower than the tender offer price suggests that there is still a perception that there’s a not insignificant chance that something might go funky.
Bangko Sentral ng Pilipinas (BSP) [link] could have another US $30 billion in reserves that it could use to hold the President’s directive to defend the P60:$1 exchange rate level. This analysis was from ANZ Research, which noted that the BSP has already spent $12 billion in its aggressive interventions in the currency market. ANZ Research said that there is a “good chance” that the peso continues to weaken, but that the BSP has “ample capacity” to contain the devaluation from breaching the P60:$1 psychological level.
MB Quick Take: As mentioned in previous episodes, the BSP is basically using US Dollars that it owns to buy Philippine Pesos on the open market, driving the price “up” for Philippine Pesos. Sort of like a stock buy-back. How useful is it for the BSP to spend $42 billion to defend an arbitrary line in the sand? Will the pressure on the Peso outlast the BSP’s willingness to throw its dollars into the currency market? There’s so much riding on the US Federal Reserve’s rate decisions in November and December.
AyalaLand Logistics Holdings [ALLHC 3.22] [link] 9M net income up 41% to P2.8 billion. ALLHC reported a 5% jump in revenues to P2.8 billion, headlined by P1.2 billion in industrial lot sales, P0.6 billion from commercial leasing, P0.5 billion from warehouse leasing (+73% y/y), and P0.1 billion from cold storage services (+178% y/y).
MB Quick Take: This is a frustrating company to analyze, largely because of the out-sized impact that industrial lot sales can have on the company’s headline profitability. I’m interested in what’s happening with ALLHC’s warehouses and cold storages, which are exploding in terms of revenue generation. If ALLHC’s warehouse services grow at the same clip through to this time next year, maybe we’ll finally see something other than dumb lot sales being the number one revenue driver for this so-called “logistics” company. And look at that cold storage growth! The numbers are still small, but there’s a ton of interest in this space in the market. DoubleDragon [DD 5.63 1.57%] and Metro Pacific Investments [MPI 3.66 0.54%] are rumored to be aggressively shopping all around Metro Manila for potential acquisition targets, and that’s in addition to all the regular names that are always prepared to swoop in with an offer when the time is right.
BDO [BDO 127.30 0.24%] [link] 9M net income up 23% to P40 billion, on “solid results across core businesses”. BDO’s Q3 teaser press release revealed that BDO’s gross consumer loans increased 10% y/y, and that its non-interest income rose to P53.2 billion on “higher fees and insurance premiums”. BDO said that its “profitability is steady and improving”, and that its “growth is broad-based and sufficiently diversified.”
MB Quick Take: Banks are a trailing indicator to whatever is happening on the ground with inflation and the rate hikes that have been employed to fight it. This is surely a great outcome for BDO and its shareholders, but from the conversations that I’ve had in private with bankers and property developers, it seems like there is a growing sense of something ominous on the horizon. As explained to me by someone in the retail loans industry, the higher rates have persuaded many to step away from new loans in recent weeks, putting off purchases of new cars, lots, or homes. It’s the people with existing loans who are starting to panic, as the rising rates increase the cost of monthly debt service alongside the rising costs of pretty much everything else in life, from rice to power.
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