Quick Take: The Quorn problem and 2 more market updates
DMCI [DMC 11.66 1.7%] [link] declared combined regular and special dividends of P0.72/share, payable on April 28 to DMC shareholders of record as of April 17. This brings the trailing 12-month dividend yield of DMC to 12.5% based on its pre-announcement closing price of P11.54/share. This year’s April dividend is 50% larger than what DMC paid out in April 2021. The trailing 12-month dividend of P1.44/share represents 31% of DMC’s previous year’s core net income.
MB Quick Take: DMC is the parent company of Semirara Mining and Power [SCC 33.05], which itself declared a fat FY22 dividend just a few days ago. That had members of the Dividend Club (no official membership, just people thirsty for passive income) politely losing their minds about what DMC could declare as a pass-through of SCC’s big div. Not bad.
Monde Nissin [MONDE 11.06 1.6%] [link] teased FY22 net loss of P13 billion, which is 506% decrease from FY21’s net income of P3.2 billion. MONDE said that it registered a “non-cash, non-operating impairment” of P20.5 billion in the value of the intangible assets relating to its alternative meat business. MONDE said that the impairment was due to “the application of a higher discount rate due to the prevailing higher interest rates and risk premiums, some margin compression, and rationalization of the trend in the meat alternative category”. Outside of this massive charge, MONDE’s revenues were up 6.5% and core net income attributable fell 19.6% to P6.6 billion.
MB Quick Take: Objectively, this is a disaster. Sure, MONDE’s traditionally-strong segments were still just as strong, but those are mature products in mature industries that are simply not going to supply the kind of growth that can make up for such a massive write-down. When MONDE talks about “impairment”, what it is really doing is just adjusting the value of the alternative meat section to more closely resemble “fair market value”, and the net difference is passed through the income statement. The most troubling part of all of this is the line “rationalization of the trend in the alternative meat category.” As Market Babbler on Twitter pointed out, Quorn is “B1T1” (buy one take one) at S&R right now. “Rationalization” is just a fluffy way of saying that MONDE needed to finally get realistic about Quorn’s value. Unless MONDE can all of a sudden figure out a way to deliver proteins that are cheaper than organic proteins, the inflationary pressures on food and Quorn will continue to discourage customers from spending more to try alternative meat options.
Union Bank [UBP 85.00 0.2%] [link] board voted to increase the bank’s PHP bonds program from P39 billion to P50 billion, a 28% increase. The board also voted to authorize the sale of P30 billion in bonds from the bonds program, but did not provide any additional information in terms of timeline for the sale or the intended use of proceeds for the money that will be raised.
MB Quick Take: More. More! MORE! UBP can’t seem to get enough capital to do all the things it wants to do. The banking sector is going through a bit of a consolidation phase right now, which means that the larger players are out shopping to buy up smaller players, so maybe UBP is cashing up to go hunting. The activity hasn’t translated directly into stock price performance yet, as UBP’s stock price is essentially flat with where it was before it announced its first SRO back in April of 2022. In that time the price has gone 16% lower and 13% higher than that level.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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