Phil. Stock Market Discussions, Comments and Forecast
MRC Allied Inc., publicly-listed firm now 80 percent owned by Lucio “Bong” Tan Jr., is setting up a P1-billion company to serve as the vehicle for its foray into the highly-extensive mining business. In a disclosure to the Philippine Stock Exchange yesterday, MRC president Benjamin Bitanga said the new company is now in the process of incorporation and will be named MRC Mining Inc. Among the initial assets to be infused into MRC Mining include a mining agreement entered into by the company yesterday for gold and copper covering a 7,955-hectare property in Kiblawan, Davao del Sur and Columbio, Sultan Kudarat. The subject parcel of land is adjacent to the property where Sagittarius Mines Inc.’s Tampakan copper gold project is located. The Tampakan mine is believed to have the potential to become the biggest gold mine in Asia and the fifth biggest gold project in the world once operational. Under a new management, MRC’s thrust is to acquire operating companies or entities that will give the company immediate profitability. The company expects to be in a position of positive operating cash flow by the first quarter of 2011. For the whole of next year, MRC is eyeing net earnings of P150 million and revenues of at least P4 billion. MRC is planning to raise at least P500 million through a follow-on offering to fund acquisitions. Tan Jr. was earlier reported to be close to acquiring a majority stake in Johnny Air Cargo. The transaction is expected to cost between P500 million to P800 million. Johnny Air Cargo (JAC) pioneered the industry in speedy, reliable delivery of packages between the United States and the Philippines.
While SMC is thinking of buying out Indophil out of Tampakan, it has to make a tender offer to the rest of the shareholders in which MVP of MPIC (PX) has a stake. Now it is rumored that MVP is trying to consider the mining site of MRC which is also located at Tampakan under Mr. Tan, in turn looking for qualified partner.
Now do your assignment and do the math.
Discovered in 1992, the Tampakan mine is considered the largest untapped gold and copper deposit
in Southeast Asia and now ranks as the fifth largest known undeveloped copper-gold deposit. It contains an estimated 2.4 billion metric tons of ore deposits with a grade of 0.6 percent copper and 0.2 percent grams per ton of gold.
This Prospectus by IP Converge Data Center, Inc. is cleared for public viewing by the Philippine Stock Exchange.
Standing near his 12-table noodle shop on Beijing’s Yonghegong Avenue, owner Liu Heliang says meat and vegetable prices have climbed 10 percent in a year and staff wages are up 40 percent.
“I’m struggling to make ends meet with costs going up like this,” said Liu, a native of Sichuan province who pays his workers as much as 1,800 yuan ($271) a month, or 88 percent more than the Beijing minimum wage, to serve up a staple Chinese meal. “Raising prices is the only way out,” he said, predicting he won’t be able to hold out beyond two months.
Premier Wen Jiabao’s cabinet last week announced it will sell grain, cooking-oil and sugar reserves, ordered an end to tolls on trucks carrying produce and threatened price controls to rein in a 10 percent inflation rate for food. Because the measures would do nothing to counter the 54 percent surge in money supply over the past two years, the risk is they will prove insufficient to cope with the challenge.
“They are just not addressing the fundamental problem at all,” said Patrick Chovanec, an associate professor at Beijing’s Tsinghua University. With the expansion of credit and cash in the economy stemming from China’s response to the global crisis, “you’re sitting on a volcano,” said Chovanec.
The People’s Bank of China has raised its benchmark interest rates once this year, lagging behind Malaysia, Thailand, Taiwan and South Korea as emerging Asian economies led the global economic rebound. Policy makers have instead relied on guidance to banks to scale back lending and on increases in reserve ratios, with the PBOC announcing the fifth boost of the year four days ago.
The Shanghai Composite Index extended declines yesterday after its biggest two-week slide since May on concern that accelerated monetary tightening will crimp economic growth. The benchmark index closed down 4.20, or 0.2 percent, at 2,884.37.
China’s plans to rein in prices include selling state food reserves, stabilizing the cost of natural gas and cracking down on speculation in and hoarding of agricultural products, the State Council said. The aim is to damp food inflation that reached 10 percent in October, more than twice the 4.4 percent headline rate.
Standard Chartered Plc economists anticipate the consumer price index will rise by an average of 5.5 percent next year, with a peak gain of 6.3 percent in June. The bank estimates this year’s increase at 3.2 percent. That compares with a 0.7 percent decline in 2009.
China will sell soybeans and vegetable oil from its stockpiles starting this week to stabilize prices, the State Administration of Grain said in a statement Nov. 19. State news agency Xinhua reported the next day that the cabinet ordered local governments to ensure food supplies ban toll collections for vehicles carrying fresh foods.
Chinese corn, sugar and rice futures have reached records in the past two weeks on concern supplies may lag behind demand.
The State Council meeting last week came amid concern at the threat increased food costs pose to the poorest people in the world’s most populous nation. More than 81 million people in disaster-affected parts of China may need food assistance from the government this winter, the Ministry of Civil Affairs said on its website on Nov. 18.
At a food market in Beijing’s Deshengmennei Avenue, fruit- stand owner Wang Yanling says sales of apples have slumped from as much as 250 kilograms (551 pounds) a day a year ago to about 100 kilograms a day after prices soared more than 60 percent.
“People are buying less with prices jumping up,” said Wang. “It’s getting harder and harder to sell.”
McDonald’s Corp., the world’s largest restaurant chain, said Nov 17. that it increased prices for its burgers, drinks and snacks in China to offset costs.
A slowing pace of economic growth may prove helpful in damping down inflation. China’s gross domestic product expanded 9.6 percent in the third quarter from a year before, down from 10.3 percent in the previous three months and 11.9 percent in January to March.
A rate increase “can’t encourage farmers to grow more vegetables, it can’t discourage people from eating less vegetables,” Qu Hongbin, co-head of Asian economic research at HSBC Holdings Inc. in Hong Kong, said in a Bloomberg Television interview.
China also is grappling with inflows of cash sparked by monetary easing abroad, bets on yuan gains and a trade surplus that surged last month to $27 billion. Officials have faulted the U.S. Federal Reserve’s plan to buy $600 billion of Treasury securities for contributing to asset-price pressures in Asia.
‘Seat to the Fire’
“Quantitative easing in the U.S. puts China’s seat to the fire because it forces more inflationary pressure onto them,” said Diana Choyleva, a Hong Kong-based economist at Lombard Street Research Asia. “They cannot avoid what they need to do,” which is raise rates or let the yuan strengthen, she said.
Policy makers have limited the currency’s appreciation to less than 3 percent since scrapping in June an almost two-year crisis policy of keeping the yuan level with the dollar to protect the nation’s exporters.
The PBOC will raise the benchmark one-year deposit and lending rates by year-end, from the current levels of 5.56 percent and 2.5 percent, according to a Bloomberg News survey of nine economists last week.
While price controls may help with inflation expectations, they will either be ineffective because producers circumvent them or create shortages if suppliers suffer losses and are not compensated, said Goldman Sachs Group Inc. economists Yu Song and Helen Qiao in a Nov. 17 note.
“Prices for everything are rising every day — no exception,” said Zhu Fulong, 35, who has run a grocery shop in Hangzhou, a city near Shanghai, with his wife since 2006. “A lot of people won’t increase their spending much, so they instead choose products at lower grade which we sell at thinner margins, and that’s hurting our business.”
Rising prices are also prompting housewives like Lily Huang, 50, to travel once a month to Hong Kong from Shenzhen in southern China to stock up on items including toothpaste, shampoo and tissues.
“Things are much cheaper here,” said Huang, carrying a suitcase and three bags full of groceries at Sheung Shui train station next to Hong Kong’s border with China. A packet of Tempo tissues is 30 percent cheaper in Hong Kong, she said. “It’s really worth the trouble for us to come here to shop.”
Known for its lush landscapes, welcoming citizens and dark stout beer, Ireland’s been considered a European gem for years.
But not all that glitters is gold.
Thanks to the global financial crisis and European debt woes, the green island nation has quickly fallen from grace. Its finances may actually be worse than Greece’s.
Despite its efforts to curb the rising tide of debt with the first austerity program among developed economies, Ireland fell short. It miscalculated. An additional 15 billion euros over the next four years is necessary—a whopping 30% of the country’s total output.
Bond yields are surging above 8% for the first time in 11 years. A third-consecutive year of economic contraction is in the cards. An IMF bailout is practically inevitable.
Why should you care? Because, as the folks at Disney like to say, “It’s a small world after all.”
The repercussions of a second EuroZone bailout will be felt around the globe. No one will be spared in the aftermath.
Remember What Happened With Greece?
When the Greece bailout hit the books, stocks slammed on the brakes.
What’s worse is that Greece’s austerity measures are falling short. The country’s budget deficit will be greater than 8.1% in 2010. Bond yields are already surging above 10%. And its economy is projected to contract 4% in 2010.
Simply put, Greece’s bailout has failed. So what are the odds an IMF bailout for Ireland will work? Slimmer than slim.
Not only will another IMF bailout not save the EuroZone from collapse, it would crush the global markets and investors—again.
The Currency War
If you thought all the “currency war” threats were over-hyped, think again.
Currency wars are devastating. Dirt-cheap currencies destroy consumer purchasing power, sparking more serious protectionist measures and crippling global growth. Nobody wins.
This is serious, folks.
Everyone is trying to keep their currencies low—the U.S., Brazil, Japan, Singapore, South Korea, India, Thailand and, of course, China. We haven’t seen currency manipulation to this extent since the 1930s. And we all know how that round of shortsighted gamesmanship ended—World War II.
Now, I don’t see armed conflict ahead of us. But if global government leaders don’t pull their heads out of their keisters—and fast!—it definitely could spiral into the kind of global economic gridlock that could devastate your savings.
We must prepare for the worst.
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A New Wave of Inflation
The U.S. economic recovery is barely worthy of that title.
Banks are still in big trouble, even with the Fed’s gift of historically low interest rates. New home sales and residential construction are on life support. New residential construction isn’t much better, with housing starts in a multi year slump. And the unemployment rate still sits just shy of 10%.
Does that sound like a fundamentally strong economy to you? I didn’t think so.
Throw in the fact that 55% of U.S. debt will mature over the next three years, Ben Bernanke is between a rock and a hard place. He has two choices:
Don’t forget, with deflation, Washington would have to pay back all those borrowed dollars with more expensive dollars. Not an option in Ben Bernanke’s world.
You know what that means: Inflation rules, and for the unprepared, its impact will be sudden and debilitating.
Don’t be a victim. Follow my three-step inflation-survival plan:
China, China, China
China is easily one of the most serious threats to investors today. Its path to financial greatness is eerily similar to Japan’s rise. And that makes me think it will mirror Japan’s devastating fall…
Japan’s export boom spurred robust economic growth for 40 years, but an undervalued yen burst one of the largest speculative bubbles in history. An earthquake that has left Japan floundering ever since.
Sound familiar? China is following in Japan’s footsteps.
Over the past two decades, China has posted an average of 9% GDP growth—mainly thanks to its robust export market. And now, it’s being called out as a currency manipulator—which it is. Chinese government leaders keep the yuan undervalued to keep the factories running at full speed and employment high. But a day of reckoning will come.
You should be very concerned.
China is much, much larger than Japan. When that bubble bursts—and trust me, it will—the consequences will be massive and widespread. No corner of the globe will be spared.
Here’s what you must do to protect yourself today:
With its diversified economy—not export-driven—Brazil is the most compelling opportunity for long-term investment in emerging economies.
No matter how you slice it, we’re facing some of the strongest headwinds of our lifetimes. The EuroZone crisis, currency wars, rising inflation and China’s bubble are just the beginning.
THE PHILIPPINE Stock Exchange has approved listed Lepanto Consolidated Mining Co.’s stock rights offering that will raise about P3 billion in fresh funds.
In a memorandum, the exchange said its board approved last Nov. 10 the miner’s proposal to list an additional 10.05 billion common shares.
The miner will sell shares to existing shareholders at P0.30 each.
The proceeds of the project will be used for the development of the Victoria gold mine in Benguet and for the retirement of loans, accounts with suppliers, and advances from shareholders.
It will also shore up the miner’s retirement fund. The miner posted a wider net loss of P420.43 million for January to September from P229.12 million last year due to lower sales for the period and higher cost and expenses.
Shares in Lepanto were unchanged on Friday at P0.335 apiece.
FLAG CARRIER Philippine Airlines (PAL) said Friday it earned $28.2 million in the second quarter of its 2010-2011 fiscal year despite labor woes, but warned of uncertainties amid the resurgence of bird flu in Hong Kong, a major market.
The Lucio C. Tan-led airline did not give comparative profit figures. In a statement, PAL said revenues went up by a third to $399.5 million for the July to September period, from $299.7 million last year.
PAL President Jaime J. Bautista said that despite positive numbers in the last two quarters, the company remained “cautiously optimistic about the airline’s growth prospects.”
“The global airline industry remains vulnerable to volatile market conditions. Take fuel, for example. If the upward trend continues, it could wipe out all our recent gains,” he said in the statement.
“While there was a huge reduction in maintenance expenses by 36% as a result of the company’s cost savings initiatives, fuel costs have gone up as a result of higher jet fuel prices from an average of $79.06 per barrel for the quarter ended September 2009 to an average of $97.73 per barrel for the same quarter period in 2010. Fuel comprises approximately 40% of PAL’s total expenses,” he added.
Mr. Bautista also said the company was closely watching the re-emergence of the AH1N1 virus in Hong Kong. “The avian flu can dampen demand at a time when the Philippines has yet to fully recover from the stigma of the recent hostage crisis involving Hong Kong nationals and the negative travel advisory against the Philippines,” he said.
PAL said passenger volume went up by 26% while cargo increased by 57%.
Total expenses for the quarter reached $371.2 million, a 7% increase from $346.0 million last year.
“To remain viable, the flag carrier will focus on continuing its cost control initiatives as the passenger and cargo markets as well as fuel and maintenance costs remain very volatile,” Mr. Bautista said.
In its fiscal year that ended March, PAL reported a net comprehensive loss of $14.4 million.
Early this month, Malacañang said it was looking for short- and long-term solutions to the airline’s string of labor woes, after the Labor department’s affirmation of PAL’s plan to outsource three units which would result in the layoff of some 2,600 workers.
Economic managers last month submitted to the President a memorandum recommending full implementation of the civil aviation liberalization policy which could ease up the process for qualified foreign airlines wanting to expand operations in the Philippines, and put more pressure on PAL.
PAL will borrow an additional P2.5 billion to fund working capital next year, on top of the P2.5 billion needed to compensate workers to be affected by layoffs. — A. M. P. Dagcutan
LISTED APC Group, Inc. said a subsidiary has signed two deals with Chevron Kalinga Ltd. to develop a geothermal project in Kalinga.
APC said unit Aragorn Power and Energy Corp. was the signatory to the deal with Chevron Kalinga, a wholly owned subsidiary of oil giant Chevron.
Aragorn Power is the holder of a geothermal renewable energy service contract from the government. The service contract in Kalinga covers around 26, 000 hectares.
“Under the agreement, Chevron will be responsible for the exploration, development and operation of the steam field and power plant activities,” the company said in its disclosure.
The steam field is expected to generate around 100 megawatts of power. It will cost $300 million to develop.
Shares in APC closed at P0.80, down 3.6% from its previous close of P0.83.
MANILA, Philippines—Publicly listed San Miguel Corp. will raise up to $3 billion from the equities market early next year by selling existing shares currently held by the diversified conglomerate.
In an interview, San Miguel president Ramon S. Ang said these “re-issued” shares would likely be priced between P150 and P200 apiece, given the company’s existing and future business prospects.
His comments pushed up the firm’s stocks to a 20-year high, ending at P105 per share Thursday on the Philippine Stock Exchange.
San Miguel’s share price has risen by a total of 41 percent over the last month due to optimism over itsnew businesses and speculation over its share sale.
Ang said proceeds from the sale would be used to fund the conglomerate’s ongoing expansion in the power and infrastructure sectors.
“We can do this as early as the first quarter of 2011,” he said on the sidelines of the government’s Infrastructure Summit in Pasay City on Thursday. “The market clamor is growing.”
The international conference was meant to draw in prospective investors that would bankroll President Aquino’s public-private partnership (PPP) scheme.
Ang explained that the common shares to be sold would come from the company’s existing holdings, as well as from its current roster of major stockholders, all of whom would release a portion of their holdings to the market on a pro-rated basis.
The San Miguel chief had earlier revealed plans to sell up to 30 percent of existing common shares next year, boosting in the process the company’s stock tradingliquidity.
Based on Thursday’s closing price at the PSE, 30 percent of San Miguel’s 2.31 billion outstanding common shares would be worth P138 billion, or about $3.1 billion at the upper end of Ang’s indicated price range.
At the lower end, the company would be able to raise at least $2.3 billion.
San Miguel, which was recently dropped from the PSE’s 30-company main-share index, is not as actively traded as other blue chips partly because of its small public float. Only about 8 percent of its shares are currently held and traded by the public.
About 89.5 percent of San Miguel’s outstanding capitalstock is held by Top Frontier Investment Holdings Inc., which is majority owned by an investor group that includes former Trade Minister Roberto V. Ongpin, businessman Iñigo Zobel and condiments king Joselito Campos.
San Miguel itself is the single biggest voting bloc owning 49 percent of Top Frontier, which also holds a “continuing and exclusive” option to purchase and acquire the 15-percent stake held by tycoon Eduardo “Danding” Cojuangco Jr. until Nov. 19, 2012.
MRC Allied Inc. is planning to raise P750 million through a preferred share offering next year to fund pre-operating expenses for gold and copper projects in Kiblawan, Davao Del Sur. In a press briefing, MRC corporate information officer Miguel A. Bitanga said the preferred share offering will likely take place in the first quarter next year to allow them to jumpstart the development of the 7,995-hectare mine site in Kiblawan and Columbio, Sultan Kudarat. The property is adjacent to the $5.2-billion Tampakan copper-gold project which is believed to contain one of the biggest untapped copper resources in Southeast Asia. MRC’s entry into the mining business was formalized following the signing of a mining operations agreement wih Alberto Mining Corp., through its president Geronimo Palermo. Bitanga said the deal was six months in the making and was an initiative of his father, MRC president Benjamin Bitanga. Under the agreement, MRC will issue P300 million worth of shares and cash to Alberto Mining, which is reportedly the same group behind Sagittarius Mines, which owns the 11,000-hectare Tampakan copper-gold project. Bitanga said the company is excited about the Kiblawan project, pointing out that earlier geological studies showed similar findings as those in the Tampakan project during its initial test phase. He said the company will conduct further studies and drilling activities once it secures the necessary permits. Bitanga said the group is open to forging partnerships with other mining companies for this project, which will serve as MRC’s flagship project and the backbone of its future business ventures. The company is setting up a P1-billion subsidiary to be called MRC Mining Inc. to handle its mining endeavors. MRC is now 87 percent owned by Menlo Capital, which is 51 percent owned by the eldest son of tobacco and airlines tycoon Lucio Tan. MRC’s new business direction is to acquire operating companies or entities that will give the company immediate profitability. The company expects to be in a position of positive operating cash flow by the first quarter of 2011. For the whole of next year, MRC is eyeing net earnings of P150 million and revenues of at least P4 billion. Among MRC’s notable assets include the 237-hectare New Cebu Township One (NCTO) and 2,312-hectare Amihan Woodlands Township (AWT) in Leyte, both master-planned communities with integrated residential, commercial, industrial, and tourism areas. Most recently, MRC struck a deal with Benisons Shopping Center Inc to acquire the newest mall in Divisoria as its latest project.
In a letter to his “Mang Inasal Family,” Edgar Injap Sia II expressed “deep sadness” like a “father parting with his child” as he hands over the care of the restaurant to the giant conglomerate.
Sia, who is in his 30’s, founded Mang Inasal on December 2003. In a 250-square meter space in the parking lot of Robinsons Place in Iloilo City, he started to offer the tasty vinegar-marinated chicken served in skewers and paired it with unlimited rice, an almost irresistible come-on. Innovating further, he began offering the menu in the familiar fast food dine-in concept. Business grew by leaps and bounds, conquering markets beyond Visayas, including Metro Manila, the make-it-or-break-it city.
For Mang Inasal’s phenomenal growth—about 100 new stores a year—Sia was recognized this year as the Small Business Entrepreneur awardee in Ernst & Young’s annual search for Entrepreneur Of The Year-Philippines. The same group named Jollibee founder Tony Tan Caktiong as its first awardee in 2004. Caktiong went on to win the World Entrepreneur of the Year title at an awards ceremony in Monte Carlo, Monaco.
Currently the 6th largest fastfood chain in the country, Mang Inasal was dubbed by a local magazine, almost prophetically, as “the new Jollibee.”
Growth was fueled by franchising, which started only in 2005. Of the 303 Mang Inasal branches, only 24 are company owned. Franchise holders of the 279 stores paid P800,000, about the same amount as Sia’s seed money when he started the business 7 years ago.
That Jollibee will be paying P3 billion for a 70% stake in Mang Inasal has made Sia “a very successful businessman,” according to bloggers and online commentators. The buying price of Jollibee, which courted Sia for the transaction, values the entire Mang Inasal business at P4.3 billion. Not a bad deal for a business that has an estimated annual total revenues of P2.6 billion and system wide sales of P3.8 billion.
Since Sia’s holding company, Injap Investments, will continue to hold on to 30% of Mang Inasal, the Jollibee deal actually valued Sia’s remaining stake at a staggering P1.3 billion. By the way, Sia already received a P200 million downpayment.
In his letter, however, Sia stressed that the deal will also benefit the intended readers–the employees, franchise holders, and loyal clients.
“I have full confidence that we will reap the benefits of cost improvement of supplies, greater operational efficiency, reliable and response-on-demand servicing, and well structured and professionally managed organization. This will mean increased revenue flow, better margins and limitless opportunities for you—not to mention better service, better quality and “mas sulit” food selection for our loyal patrons.”
He also assured them that, during the turnover process and beyond, their “voice will be heard every step of the way.”
He said two board seats in the new organization have been reserved for him and Ferdinand Sia, the current chief operations officer. Both will also be part of the management committee “for the coming years.”
Sia stressed that the deal with Jollibee will strengthen the brand. As the business is on its way to becoming a “Global Mang Inasal,” Filipinos will be “proud,” he said.
“Mang Inasal will have the professional support and vast resource needed to steer the business to the next level,” Sia wrote. “Knowing that [Jollibee’s] Tony Tan Caktiong share the values and business principles I have, I know that my VISION of better quality lives for the Pinoy Diners and Pinoy Entrepreneur will live.”
Growing the business was part of Sia’s goal when he decided to offer the company to the public early next year. Since 2008, Sia has been ramping up interest in Mang Inasal’s success story in preparation for a planned Initial Public Offering. Fresh funds from the capital raising exercise were supposed to finance further store expansion. The aim was to have 500 outlets by 2012. Before the Jollibee deal, it just opened its 300th outlet at the SM Mall of Asia.
Thus, despite the pain and the deep sadness, Sia said he is “ecstatic and in high spirits” since the future of his “7-year old child…is secured and filled with great optimism.”
More “little Jollibee’s”?
It is likely that keen watchers of entrepreneurship have not had the last of Sia’s genius —or luck.
Aside from Sia’s remaining 30% stake in Mang Inasal, Sia’s Injap Investments also has a stake in Deco’s, another up-and-coming food business that serves “batchoy”, a soup made of meat stock, noodles, and garnished with local herbs and spices.
Batchoy was first started by a young butcher called Deco Guillergan Sr., in 1938 in a carinderia at the La Paz public market in Iloilo City. Sia’s Mang Inasal also first flourished in the same city.
Just like how Jollibee has grown through brand extensions and numerous acquisitions, Sia has forged a partnership with Guillergan’s children. Deco—and its “heavily guarded batchoy secret”—was eventually folded under Sia’s Injap Investments.
Deco stores have been slowly expanding to neighboring provinces in Visayas and Metro Manila. Will it be Sia’s new “little Jollibee”?