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8:18pm  Thursday  15 September 2011

For those who are itching to get back in the game, I think MA/B might be a better short term trade.  I think many are convinced that there will be production within the next 12 months; and, of course, there is the mine that is being developed by PX.  Also, I believe technical traders would have spotted the turning up of the RSI on rising volume as well as a good looking candle on the chart that may presage a bottoming out.

Having mentioned PX, looks like investors are comfortable coming back into the stock when it traded at 24.  Strong buying brought it back to above 25.  The thing about PX is that it is one of two stocks that most foreign houses have research coverage in.  This means that if foreign buying emerges in mining, PX will certainly be the main issue to ponder.

A few readers have asked about my views regarding the prospects for Puregold IPO.  Well, I did attend the investors briefing and have kept abreast of what has been going on since.  One of the key numbers that attracted me was the 1H-2011 net income of Php782 million which I reckon would exceed Php 1.7 billion for full year 2011 given that they will be opening 25 new stores before year-end 2011.  I am also comfortable with some analyst projections that 2012 net income could exceed Php 2.3 billion.  It is a low marging business, but these guys seem to have a strong handle on the market.  Puregold is somewhat of a household name already in the NCR being ubiquitous already in the region.  Indeed, they  have a well defined business plan and have the logistics to make it happen.  It is surely a pure play on the mass market consumer spending in the same way that Warren Buffet believed that American consumers would flock to Walmart during tough economic times.  Puregold is also has strong operating cash flow which is unlike the Uniwide of more that a decade ago which went bankrupt after the IPO because they went into non-core businesses.  I think Puregold is 100% focused on their business model because it makes a lot of money.  If it ain’t broke, why fix it?

Anyway, the underwriters tell me that during their ongoing roadshow in Hongkong, Singapore, London and New York, demand for shares may be clear around the Php 16 level.  The IPO may go pretty well, I think.  Investors must keep in mind that issues like these should be understood from a long term point of view.

As far as the overall market is concerned, I think further volatility is at hand and will likely make certain stocks cheaper.  I am looking at DMC, EDC and SMC for the time being to become cheaper because they are very interesting buys.  Mining stock may take a back seat in the next few days, but mines are where the gold is.

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