First Metro Asset Management Inc

Prospecting the city, by Gus Cosio

7:25 pm   Tuesday  23 August 2011

I was just watching 2 Philippine stocks today because they were the most interesting – LC and TEL.  Obviously, I was expecting LC to open a tad easier because of the very strong buying yesterday that ought to have enticed profit takers today.  To my surprise, buyers did not wait for the profit takers to bring the stock cheaper.  apparently, there is still pent up demand for LC/B out there as less and less of early buyers are putting shares into the market.  I, for one, have locked my earliest purchases in my bottom drawer in order not to be tempted to sell.  With my average cost way below current price levels, I am so inclined to see LC/B all the way to next year.  Actually, beyond my core position, I did add more shares and sold to profit take only to buy the same shares higher.  For my last purchase which I made at 1.40, I prefer to be patient and wait it out until the stock rises above 2 pesos.  It may be just around the corner.

For TEL, there are a lot of speculation about the merger with DGTL not going through so I gave the stock some thought.  It seems that there had been a lot of mixed feelings about TEL over then past few days which was good for my positions.  I was able to pick up good volume yesterday below 2340. Today, I picked up good size again at an average cost below the close of 2430 which should translate to 2352 ex-dividend tomorrow.  What amazed me was the intensity of buying of TEL today.  I also saw a news article which said that the CA gave a decision allowing GLO to provide telco service in the Bonifacio Global City.  I think this situation was quid pro quo to GLO’s filing an objection to TEL’s acquisition of DGTL and paves the way for the merger to be completed.  That is of course just me talking.  Nevertheless, I could not walk away from an annual dividend yield of 9%+ which TEL is providing at these prices.  Given the terrific cash flow of the company, the dividend play is a sure way to make money work.  The activity in the stock today tells me also that perhaps the 2500 benchmark given in the DGTL acquisition may just be the magic number for TEL.

Actually, I did catch a glimpse of other stocks like EDC which technicians would consider as having bottomed out.  I’ll leave it to them to analyze.  I was told that the loss of 2.3 billion reported is pretty good for EDC because it gives them a “net operating loss carry over” or NOLCO of around Php 900 million a year for the next 3 years.  The figure would give them an income write back which would raise after tax bottom line further.  Anyway, you could ask your broker or financial adviser what that amounts to.  As for me, I am willing to put more money in the stock in anticipation for a 40% rise in 2012 earnings.  In fact, I picked up some shares yesterday at 5.80 which to my mind was a bargain basement price since my horizon for the stock is 2 years.

Of course, how can I end without mentioning ORE which I had already intended for a space in my bottom drawer.  I was expecting it to go to 5.45 sometime in the coming weeks.  Although it closed at 5.41, it did trade above 5.45 which gave me some reason to rejoice.  I am now thinking that 13x P/E may just be in the cards or perhaps the latest analyst coverage my upgrade the stock.  Anyway, today’s market should give investors some sigh of relief because it affirms the belief that our market is not too correlated to the major markets.  We could be going our separate way because of the bright prospects of individual stocks.

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First Metro Asset Management Inc