Quick takes from around the market

1. Discovery World [DWC 1.20, down 1.6%; 0% avgVol] [link] pushed P65 million of new capital into three subsidiaries to expand its resort businesses in Siargao, Davao, and El Nido. Two of the three transactions were made as part of an increase in the subsidiary’s authorized capital stock.

 

MB quick take: I don’t follow DWC too closely, but it’s a good idea for corporations to lean into sectors that the government supports, and right now, the government is heavily incentivized to support gambling and tourism. DWC is probably encouraged by the recovery in domestic travel as evidenced by the reports from Cebu Pacific [CEB 31.70, down 1.9%; 37% avgVol] and Philippine Airlines [PAL 5.12, up 0.2%; 1507% avgVol].
 

2. Alternergy [ALTER 0.71, down 4.0%; 70% avgVol] [link] received P1.45 billion from GSIS in exchange for the fund’s subscription in ALTER preferred shares. The original agreement was worked out over a month ago, but ALTER has now received the cash and said that it will help “fund the next phase of development in ALTER projects, including the construction of the Tanay and Alabat Wind Power Projects.”

 

MB quick take: Renewable energy development is a capital-heavy business that requires companies to pursue an “all of the above” strategy when it comes to sourcing funds to support development. There’s a general feeling in some investors that debt in any form is bad, and while preferred shares are something of a hybrid form of debt (they have some aspects of being a stock, and some aspects of being a bond), they’re a useful tool for a company like ALTER to boost its balance sheet. I’d be giving the side-eye to any renewable development company that wasn’t raising equity, selling prefs, and selling bonds.
 

3. Cosco Capital [COSCO 4.59, up 0.4%; 33% avgVol] [link] acquired 60% of Catuiran Hydropower Corp. (CHC) from CHC’s parent company, Union Energy Corp., for a price and other terms that will be “announced in due course.” The 8MW hydropower plant is located in Oriental Mindoro, and has been in operation since 2019 under a Renewable Energy Service Contract with the Department of Energy. COSCO said that the purpose of the acquisition is to “bring an additional profitable business operating segment to the Cosco Group”, and to “contribute to the country’s economic development.” COSCO is a holding company owned by Lucio Co.

 

MB quick take: Would it surprise you to learn that Lucio Co and his wife own Union Energy, and that this is really just another example of Lucio Co using his public company to buy assets from himself? It did surprise me to see COSCO getting into renewable energy, but my first thought was, “haha, wouldn’t it be hilarious if its just buying something from Lucio Co?” COSCO isn’t under an obligation to reveal the price of the transaction because it doesn’t exceed the reporting threshold (>10% of COSCO’s book value), but the company said that the price of the transaction would be based on “PE multiples of projected net income”. It will be interesting to see how that multiple compares to the publicly traded examples that we already have on the exchange, like Repower Energy Development [REDC 7.00 unch; 37% avgVol] and Alternergy [ALTER 0.71, down 4.0%; 70% avgVol].

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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.