Chelsea [C 1.14; 182% avgVol] [link] reported a Q1 net loss of P324 million, which was 22% better than its Q1/22 net loss of P415 million, and 69% better than its Q4/22 net loss of P1.0 billion (nice). Chelsea attributed the better performance to the easing of COVID movement restrictions, but also said that “the Group has yet to achieve its anticipated economic and business recovery in 2023.” Chelsea said that it is trying to recommission “one vessel at a time” from the extended drydocking that it used to preserve its ships during the disastrous pandemic lockdown. Passenger revenue was up 155% to P407 million, and freight revenue was up 9% to P883 million, but Chelsea said that it was unable to meet the full demand for its freight services due to a lack of ships and container vans.
MB Quick Take: Not a good look when the growth of the company’s largest business segment (cargo) is limited by logistics issues, which is literally the company’s middle name. It’s also a bad look when Chelsea is turning away business when its burn rate is such a key issue. It has about P1.0 billion in current assets (cash and securities that it could reasonably convert to cash within the year), and a “burn rate” of about P320 million per quarter. At this pace, it has little more than one year left of money before the well runs dry. Chelsea’s runway could get longer if passenger and cargo revenues continue to climb and costs are minimized, or if it somehow raises more money, but if next quarter is substantially similar to this one, the company is in a lot of trouble.
Prime Infrastructure Capital [PFR pre-SEC] [link] received a 15-year extension to the Malampaya service contract, through February 2039, and is said to be planning to spend US $600 million to squeeze additional life out the project by exploring the region and drilling new wells. The fuel extracted from Malampaya is used to power up to 20% of the Luzon power grid.
MB Quick Take: Perhaps this is the reason why Enrique Razon felt emboldened enough to raise the size and raise the price of the upcoming PFR IPO in Q3 of this year. This is a pretty huge spend by the consortium, but if it pays off the rewards will flow to the group for many years and make Mr. Razon and his shareholders quite happy. The trick is the risk: there are a ton of variables that could chip away at the profitability of extending Malampaya’s lifespan that the consortium will need to address over the coming years, so this success isn’t a sure thing just yet.
The International Monetary Fund (IMF) [link] said that “a continued tightening bias” by the BSP “may be appropriate” until inflation has cooled down into the target range of below 4%. The IMF maintained its 6% GDP growth forecast for the Philippines but said that continued high inflation could put that forecasted performance into jeopardy.
MB Quick Take: This runs counter to the off-the-cuff remarks by BSP Governor Medalla about the BSP’s ability to potentially break ranks with the US Federal Reserve today and pause rate hikes. We’ve seen the BSP talk big about going it alone before, only to follow the Fed to protect the peso. Core inflation just isn’t “good” yet, and the IMF seemed to be reminding the BSP directly of this situation in the statements that it made earlier in the week. The BSP’s rate decision will come out later today.
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