Sunday, March 06, 2016

Phisix 6,900: Surprise! SM Investments Posted ZERO Net Income Growth for 2015!!! Why PLDT’s 2015 Income Tumbled!

We are currently wealthy, fat, comfortable, and complacent. We have a built-in allergy to unpleasant or disturbing information. Our mass media reflect this. But unless we get up off our fat surpluses and recognize that television in the main is being used to distract, delude, amuse, and insulate us, then television, and those who finance it, those who look at it, and those who work at it, may see a totally different picture too late. Edward R. Murrow: "Good Night and Good Luck"

In this issue
Phisix 6,900: Surprise! SM Investments Posted ZERO Net Income Growth for 2015!!! Why PLDT’s 2015 Income Tumbled!
-Phisix 6,900: Intensifying Fear of Missing Out Trade or the Mania has Returned!
-Why has the Fear of Missing Out Ignored Domestic Banking Stocks?
-Eerie Parallelism Between the PSEi and Brazil’s Bovespa, The Fumbling USD as Key Driver to Global Risk ON
-PLDT’s Crash: Business Model Based on Stagnating Top Line and Ballooning Operating Costs
-Surprise! SM Investment’s Net Income Growth for 2015 was ZERO!!!!
-SM’s Price Surge: An Upcoming SM Retail IPO?

Phisix 6,900: Surprise! SM Investments Posted ZERO Net Income Growth for 2015!!! Why PLDT’s 2015 Income Tumbled!
Phisix 6,900: Intensifying Fear of Missing Out Trade or the Mania has Returned!
Fear of Missing Out (FOMO).

Present actions at the Phisix can only be described as an increasingly FOMO strain
The Philippine stock market has been a manifestation of violent shifts in extreme sentiments: particularly from January’s ‘Fear’ to February-March FOMO’s ‘Greed’.

Since “fear” accounts for one of the base human emotion—as it is with its opposite: greed—then the violence in market response have only exhibited emotional distress or signs of growing instability.
First some numbers.

From the lows of January 21 6,084.28 through March 4’s 6,899.77, such ascent translates to a 13.39% in 29 days. This has basically almost erased all of the year’s losses, although the Phisix is still down by miniscule .76%. Yet the average daily gains during this ripfest have moderated to .46% from about 1% during the initial blast-off.
This was primarily because of the other week’s hiatus which has been short lived. That’s because this week the PSEi went into another overdrive where the index soared by 1.89%.
From a technical perspective, in contrast to the January breakdown from key support levels, this time the Phisix have broken through key resistance levels.

So while the bullish outlook may read this as a key reversal, current technical conditions would make the January breakdown a “whipsaw”. Whipsaws neither confirm nor deny the reversal from the previous trend. In short, from a technical perspective, current trends suggest of a “no man’s land” or a “purgatory”.

Additionally, current conditions have been indicative of a seething “overbought” condition.
The “fear of missing out” syndrome represents a social phenomenon stimulated by emotion. Fundamentally, FOMO represents a dopamine rush to find satisfaction by emulation or “a pervasive apprehension that others might be having rewarding experiences from which one is absent”. Or FOMO can be qualified as “the fear of regret”, which according to Wikipedia, “may lead to a compulsive concern that one might miss an opportunity for social interaction, a novel experience, profitable investment or other satisfying event”1

In short, FOMOs function as the basic psychological ingredient to or bandwagon effect or in financial market lingo, manias.
The ultimate sign of FOMO is when bad news has been construed as fodder for frantic bidding sessions.
Let us take last week as an example:
On Monday, PLDT’s shares had been taken to the woodshed for the revelation of a collapse in earnings in the 4Q. PLDT reported a negative Php 3.27 billion income in the 4Q while reported income was down 33% to Php 22.1 billion for the year 2015.

Because PLDT was crushed by a shocking 17.9%, the PSEi fell by 1.48%.

By the way, the largest telecom firm accounts for the third largest market share weight among the 30 composite issues index. In spite of this week’s freefall, TEL still has a share weight of 6.24%.
And visibly hurt by deterioration in fundamentals and the slump on the index, as if by coincidence, SM Investments went on to announce a merger of its unit while at the same time, disingenuously declared 2015 as a year of G-R-O-W-T-H!
Stunningly, what was sold as year of G-R-O-W-T-H had nothing been more than a public relations legerdemain because SM’s consolidated income growth for 2015 was Z-E-R-O!

Let me repeat: SM posted ZERO earnings growth for 2015!!! (see below)

Yet SM’s announcements spurred manic buying over its stocks that spilled over to key issues with the biggest market weight. This has sent the Phisix skyrocketing by a stunning 4.31% in three straight days!
Remember, at 10.8% SM has the largest market weight share in the Phisix
Instead of showing the price changes, the above diagram exhibits on the weekly market weight changes of the PSEi basket in %.
It shows that the share-weight gains by 5 of the top 12 issues at 22.03%, brought about by price surges, more than offset the 20.81% loss in market share by the PLDT. PLDT lost a horrifying 19.34% share this week!
In terms of % changes in weekly prices, the top 5 performers were as follows: SM +7.69%, ALI 6.08%, JGS 6.42%, AC 6.91% and GTCAP +4.74%.

Yet the distribution of gains for the top 15 in both market cap and weekly changes appears to be in the direction of the biggest to the next smallest.
Additionally, the market gains of the next 15 issues had been tilted towards the 5 of the bottom 12.

In terms of % changes in weekly prices, 7.68%, RLC 10.22%, MEG 9.46%, PCOR 13.79% and BLOOM 17.35%. Yet the distribution of gains for the next 15 in both market cap and weekly changes appears to be in reverse of the top 15: biggest gains from smallest to the biggest weightings.

In sum, the PSEi’s weekly gains of 1.89% that led to 6,900 had been brought about by a frantic pump of 5 issues of the top 12 biggest market share, which negated the collapse of PLDT, combined by the marginal contributions from the substantial gains of mostly the 5 of the 12 bottom issues, as well as, the modest advances by the rest of the members.

For the week, advancers walloped decliners 26-3 with one issue unchanged.
Last week’s dynamic would seem like the PSEi spike had been programmed.
Conspicuously absent in the week’s frenetic pumping has been the banking and financial sector (blue rectangles). Why? Because FOMO forgot the banks, which ironically functions as the lifeblood for statistical GDP? Because FOMO believes that bubble industries have been generating huge free cash flows to internally finance “G-R-O-W-T-H”? That’s not what balance sheets of listed companies have been showing us.

For the FOMO week, the banking index delivered only .52% gains! Year to date banks remain in deficit, down by 2.86%. Meanwhile gains from the mainstream industries (which includes the mines) dwarfed the banks. In pecking order by week, holding 5.3%, (year to date 2.52%), property 4.78% (y-t-d -3.22%), mining sector 4.34% (+6.29%) and Industrial 2.66% (+3.21%).

The service sector crashed 8.44% to accrue an annualized -8.11%
Meanwhile, the 29 day pump has yanked out the industrial and holding sectors from the negative to post positive returns on a year to date basis.
The mining sector remains as the top performer, buoyed largely by the general sentiment rather than by international price of gold.

Domestic mines have substantially underperformed its US peers. USD prices of gold soared by 3.05% this week as the gold prices appear to have returned to the bullmarket according to Bloomberg. Meanwhile, the US gold bugs index (HUI), a composite index of US gold mining majors vaulted by 6.45% over the week. Year to date, the HUI had been up an astounding 54.67%!


Curiously despite considerable gains in some property stocks that spiked the index this week, the property index also remains down for the year.
Why has the Fear of Missing Out Ignored Domestic Banking Stocks?
I noted above that banking stocks appear to have been overlooked by the FOMOs.
Has the above been the reason why the FOMOs forgot a push on the banks?

Despite the sporadic pumps at the Philippine treasuries, spreads of the 10 year relative to the 3 year have not just been NEGATIVE in three out of the past FOUR weeks, but the inversion has deepened! The NEGATIVE spread has now reached 40 bps!
The belly of the curve (10-5yr) has signified an even more critical juncture. Aside from four weeks into inversion, the negative spread has dived to 62 bps!
The Bangko Sentral ng Pilipinas’ (BSP) January data showed of a big jump in bank credit expansion to 16% from December’s 13.7%, as well as, in liquidity growth at 11.5% from December’s 9.4% (see top). It’s not clear whether January’s data represents a reversal and a pickup on inflationary activities or if this has been merely a one month quirk. One month does not a trend make.
Yet Domestic banks may already be panicking. In recognition of the implied tightening of the financial system due to an ongoing squeeze in interest rate arbitrages, the surge in January’s bank lending extrapolates to the thrust to wangle profits and earnings through volume expansion at the expense of credit quality.

I don’t need the BSP to tell me that banking system’s portfolio has been rotting. Shouting statistics won’t shoo away developing balance sheet decay.
Yet if January’s credit expansion and liquidity growth momentum will be sustained, then CPI and all other real economy prices can be expected to advance going forward. If so, higher inflation expectations should eventually reveal its ugly head through HIGHER treasury yields, with most of the pressures likely to occur at the front end. And this will only exacerbate on the extant negative yield curve strains
So far, results on prices in the real economy have been mixed (although with a bias for lower prices). Based on government tabulations, for January manufacturing input remains in deep deflation (manufacturing boom?), retail prices of construction materials dived and wholesale prices of construction materials popped out of deflation for the first time in at least a year (construction boom?).

Hasn’t the recent financial strains by PLDT and SM not been tied to the NEGATIVE spread? Have I not been repeatedly warning about this? My December 2014 post is an example2
Current developments in the Philippine bond markets suggest that yields have been rising across the curve but the pressure of increases has been in the short (bills) maturities than the longer bonds…thus the flattening. The flattening of the yield curve thereby signals the ongoing tightening of monetary conditions. Rising short term yields are symptoms of emergent strains in the Philippine financial system…
Via the law of scarcity, this means that eventually the developing entropy in the domestic credit markets, presently being ventilated in the bond markets, will reach a point to expose on the Potemkin Village pillared on a credit bubble; an inflection point from which the BSP won’t be able to control.
Today, the issue has transitioned from flattening to inversions or negative spreads (where long term rates are LOWER than some of the shorter equivalent).

In short, current conditions have been WORST than when it was in 2014 (see below PLDT and SM’s topline performance)
And so far, anent consumer prices, February CPI, as reported by both the BSP and the PSA, dropped to .9% from January’s 1.3%.

Yet the monthly decline of February’s CPI at .3% represents the largest drop since 2008! (see lower window)
Hasn’t it been an irony, where underneath the façade of tranquility as painted by the mainstream, there have been palpable indications of progressing strains in the financial system?

Yet the FOMO represents an act of desperation in the hope that higher stocks will expunge all these adverse developments.

More signs of terminal phase of the domestic bubble.
Eerie Parallelism Between the PSEi and Brazil’s Bovespa, The Fumbling USD as Key Driver to Global Risk ON

The PSEi seem to have a stock market sibling. By sibling I mean parallelism in the movements or undulations of the aggregate stock prices or the stock price trend. In fact, an eerie affinity which extends from the start of 2015. The upside and downside violent swings, particularly in late 2015 through 2016, has almost been an exact mimic/copy.
Unfortunately, the sibling has not hailed from the same region, but has been situated across the Pacific Ocean, a distance of an estimated 19,300+ km.

In economic performance, however, unlike the domestic conditions, the Latin American sibling, or particularly Brazil, has fallen into a deep economic contraction -6% as of January. The said country has been in a recession and is expected by the mainstream to sink deeper into an economic quagmire.


But hold on. Hasn’t the Brazil’s stocks boomed along with the Philippines during the past month? Brazil’s benchmark, the Bovespa (BVSP), skyrocketed by an eye-popping 18% last week (see black line)!!!!

This week’s sudden stock market boom has lifted year to date performance from negative to 13.23%!

Will the PSE follow?
Yet just why should the PSEi share an uncanny likeness with the BVSP?

How long will such correlation last?

Has current correlations have been due to the USD?

The USD peaked against Brazil’s real during the third week of the January which coincidentally was the same time the USD climaxed against the Philippine peso
Like the BVSP, Brazil’s currency real soared by a titanic 6.2% this week! The huge rally in Brazil’s financial assets had been attributed by media to the detention by the former president Lula da Silva.

But upon closer inspection, whether it has been Brazil real or the Philippine peso, to soaring stocks worldwide to an upturn in prices of commodities…everything seems to have linked to the USD. The USD index was down by .9% this week.
Meanwhile, movements of oil prices, which has had increased correlations with movements of stocks, have become a major conduit for authorities to conduct stimulus. This week, US crude WTIC spot prices soared 10.62% to $36.33 on talks of agreement by producers to cut production.

More evidence that the current risk ON conditions have significantly been a driven by the sinking USD.

This week’s peso’s surge (USD PHP down by 1.2%) reflected on a regional dynamic.

The USD plunged most against the South Korean won (-2.8%), Malaysia’s ringgit (-2.39%), Singapore’s dollar (-2.37%) and the India’s rupee (-2.24%). See top frame.

The JPM Bloomberg Asian Index zoomed this week (lowest window)
The USD peso closed at 46.945 this week. This means that the peso underperformed the region.
Nonetheless, of most of Asian equities has rallied mightily as a consequence of the weak USD (middle pane.) To cite a few weekly booms: Singapore’s STI +7.08%, India’s Sensex +6.44%, Japan’s Nikkei +5.1%, Australia’s ASX 200 +4.3%, Hong Kong’s HSI +4.2% and China’s Shanghai index +3.86 (the latter had been once again boosted by government intervention according to the Bloomberg)
As previously noted, the USD dollar has been the “most crowded trade in 2015”. Since no trend goes in a straight line, what we are likely has been a typical counter trend rally characterized by violence.
Back to the parallelism between the PSEi and BVSP: Could the unusually tight correlation between the PSEi and BVSP signify a Brazilian template for the Philippine economy once the USD rally resumes?
PLDT’s Crash: Business Model Based on Stagnating Top Line and Ballooning Operating Costs
Officials at the Philippine Stock Exchange perhaps believe that deteriorating conditions of corporate fundamentals of the cumulative listed firms may have been an anomaly. This may have been the primary reason for them to withhold disclosure of information to the public for the past two quarters, particularly 2Q and the 3Q.
They probably believe that the market’s ‘animal spirits’ may continue thrive in the absence of adverse information. And that such suppression of information will bring the ailing corporate health back to salutary conditions.
Well, they are gravely mistaken. With PLDT’s surprise announcement, (and with SM’s Zero Growth), the general conditions of listed companies have markedly worsened!
With two of the three largest companies in trouble, how will the PSE put a spin on them? Or will the accrued performance of listed companies remain silenced? 
 

PLDT’s reported income for 2015 was down steeply by 35% for 2015!

Such was mainly brought about by 4Q’s NEGATIVE performance. According to Reuters, PLDT suffered a “net loss of 3.27 billion pesos ($69 million) in Q4 of 2015 versus net income of 6.13 billion pesos in the same quarter the previous year”.
Aside from reported net income, core income and EBITDA as provided by PLDT had been markedly down by 6% and 9%, respectively, for the year.
While it has been true that losses by the largest telecom firm as attributed by many media outfits has been brought about by its investments in German firm Rocket Internet which shares collapsed in 2015 (Php 5.124 million impairment based on PLDT’s 4Q disclosure, p. F-43), and by foreign exchange losses (Php 3.036 billion, p. F-4)3, what has been largely missed has been that the company’s gross revenues continue to stagnate. PLDT’s NGDP grew by only 1.6% in both 2015 and 20144!
[UPDATED to add: correction to PLDT's 2015 NGDP: It's not 1.6% but .16%]
 
So while PLDT’s gross revenues had barely advanced, operating expenditures has grown 10.71% and 3.94% during the same period. In short, when costs have been growing faster than revenues then losses will become the eventual outcome.
So even without the shocks from investment and foreign currency losses, PLDT has been bound for losses under the current business model template.

Yet to compound on the cost factor, has been PLDT’s surging debt load (long term debt up 24.76%).

Competition can partly be attributed to this. Globe’s NGDP/consolidated revenues grew by 16.21% and 8.51% in 2015 and 2014. But competition would not be enough.

That’s because crawling topline growth has been the industry’s predicament!
To reckon on the duopoly or the combined PLDT and GLO’s topline, nominal growth rates for 2015 and 2014 had been miserly 6.2% and 4.08%. In short, the industry’s gross revenues have hardly been growing. So controlling costs has been pivotal factor in determining earnings.

That’s unless these companies find new products or services to sell in order to augment their incumbent business models.
Nonetheless, the industry’s topline growth rate bespeaks of the government’s much touted economic variable called the GDP. 5.8% GDP for 2015 eh?
And instead of hunkering down to conserve on existing resources, the top PLDT official said that capex would remain at Php 43 billion for 2016. Question is, given the current decline in income growth, which should translate to lower or tighter free cash flows, how will this be financed? More debt perhaps?
While the temporal strengthening of the peso should provide a breathing room, PLDT’s incumbent model would have to be recalibrated to adjust with the changing reality.
Yet apparently, bad business models thrive mainly because of the low interest environment or financial subsidies provided for by monetary officials. Why improve on business models when financing is cheap and plentiful?

More importantly, bad business models survive due to restrictive regulatory environment that serves as substantial barriers or ‘protection’ against the entry of more efficient competitors.
In other words, instead of prioritizing consumers, such companies subsist on political rent seeking.
Said differently, the advantage of inefficient industries and firms has been from the protection provided for by incumbent political institutions.

But such advantage cannot escape the fact that they are economic entities subject to the basic laws of economics.
TEL’s crash shows of an all-important breakdown of 2008 support levels.
Of course, entropic fundamentals have not just been restricted to PLDT.
Yet how much more losses would accrue to such firms when the liquidity conditions worsen?
As an old saw goes, prices are relative. High prices can go higher. Low prices can go lower.
Surprise! SM Investment’s Net Income Growth for 2015 was ZERO!!!!

By and large, stagnating revenues and ballooning costs will be the model seen behind many of today’s high profile industries.
Despite this week’s meltup in stocks, the largest listed firm in the PSE, SM Investments, seem to now manifest initial strains somewhat similar to PLDT’s model
Yet it’s truly a sad spectacle for some listed firms to use publicity relations gimmickry to conceal the real state of their financial health. And it’s especially unfortunate when such devious maneuvers appear to have been used by the largest firm, SM Investments
Aside a side note, from the behavioral perspective, inattentional or perceptual blindness from selective attention accounts for one of human’s psychological or behavioral foibles.

In a 1999 study presented by psychologist Daniel Simons and Christopher Chabris, popularly known as the “gorilla experiment”, the audience had been instructed to count the number of ball passes made by a group of people wearing a specific colored shirt. There are two groups of people wearing two different colored shirts moving and passing balls within their group. As the two groups conducted their moving and ball passing routine, a gorilla casually walked across these groups.

At the end of the experiment the audience was asked, not of the number ball passes, but if they had seen the gorilla. And surprisingly, half of the observers said that they had not seen gorilla at all.

The psychologists said that “It was as though the gorilla was invisible”, such that they concluded of the two vital messages from the experiment “that we are missing a lot of what goes on around us, and that we have no idea that we are missing so much”.

I offer a third insight: That half of the audience blindly followed what the psychologists instructed them to do by suppressing the other sensorial information, viz., the gorilla.

In short, perceptual blindness can arise from the manipulation of information.
Proof of this can be seen in magic tricks.
The secret of many theatrical or street magic has hardly been due to the ‘hands is faster than the eyes’ but mostly on the refocusing of the attention of the audiences to the effects of the magic trick by the magician while at the same distracting them through the suppression of attention on others. Such is called the art of misdirection.

Let us see how SM Investment seems to have applied the ‘art of misdirection’ and the ‘gorilla experiment’ to their latest press release.
In last week’s disclosure, the company bannered “SM Recurring Net Income Rises 13% in 2015”5.

The press release opened with the key paragraph:
“SM Investments Corporation (SM) reported a 13% growth in recurring net income in 2015. Consolidated net income stood at PHP28.4 billion in 2015, posting the same level as last year. Consolidated revenues grew 7% to PHP295.9 billion for the period.”

In the succeeding paragraphs, the disclosure went on to describe growth in the context of the industries which their subsidiaries catered to, in particular, retail, banking and property.
The press release ended leaving the impression that SM’s performance in 2015 was about G-R-O-W-T-H.

And as usual, media swallowed hook line and sinker what SM reported that made them seeming extensions of SM’s PR outfits.
Given the huge expansions, NO ONE bothered to ask: Whatever happened to these expansions or to the non-recurring financial conditions? Or why focus only on recurring income when the company had spent so much to expand capacity?
Moreover, to extend on this: just what had happened to the non recurring segment for SM to declare: “Consolidated net income stood at PHP28.4 billion in 2015, posting the same level as last year”?

With emphasis: the SAME LEVEL as last year!
To verify on the claim, here is SM Investment’s disclosure for the performance of the year 2014 in March 4, 20156:

“SM Investments Corporation (SM) reported a record net income in 2014 of PHP28.4 billion. Excluding extraordinary items, recurring net income grew 14.4%”

So consolidated net income for 2015 was PHP28.4 billion. Net income in 2014 was a record PHP28.4 billion. So there was no reportorial error in SM’s disclosure.

Given that consolidated net income in 2015 was at the SAME level as last year at Php 28.4 billion, this means SM posted growth rates of NADA, ZILCH ZIPPO or ZERO!!!!!!!!!
Like the gorilla experiment and the art of misdirection, the audience had been asked to read on the SM press release by following all the growth numbers by segment as the firm recited upon.

Again, at the end of the press release, the dominant impression conveyed to readers must have likely been about G-R-O-W-T-H! But that’s even when there was NO growth at all!

By enthralling the audience with G-R-O-W-T-H, the second paragraph of the report’s opening “Consolidated net income stood at PHP28.4 billion in 2015, posting the same level as last year” had tacitly been suppressed!
Of course, SM didn’t bother to account for WHY the growth rate on consolidated NET INCOME was ZERO. If they explained it then the magic art of misdirection would not work.
SM’s record income of 2014 was at Php 28,398,584. Then, the Weighted Average Number of Common Shares Outstanding was at 796,317. Since SM’s weighted average common shares have grown by 1% a year in the last two years, I apply this rate of growth to net income in 2015. 
 

If my estimates of weighted common shares outstanding have been inaccurate, at best, SM EPS will be at ZERO. Yet if my guess is right, then SM’s EPS will reveal a NEGATIVE in 2015. 

So much for G-R-O-W-T-H.
And that’s just the second paragraph.

There yet has been the pivotal THIRD paragraph that needs to be reckoned with:

Consolidated revenues grew 7% to PHP295.9 billion for the period.
Huh??? After all the bruited about expansions, SM’s NGDP was only 7%??????!!!!! Holy Smokes!!!!!!!!!!! What happened????
The third paragraph has likely been reason for the ZERO growth…
To reiterate with emphasis, despite the massive wave of additional inventories to retail stores, to shopping malls to property to bank branches, bank loans and bank assets, the shrinkage in growth rates of SM’s consolidated revenues has been accelerating for the past two years: 2015’s 7.17% growth rate accounts for a 45% decline from 2013’s 13.14%! 2015’s topline has been down 19% from last year’s 8.85%.

That’s in NO WAY signs of G-R-O-W-T-H!
Again, just what happened to all the increased inventories??????
Massive inventories should be augmenting on the growth rates. But what SM’s numbers have shown has been a deduction for two straight years.

Two possibilities: have new inventories accounted for much of the 7% revenue growth that masked weakness on the same store sales growth??? Or as per press release, has the gist of the 7% revenue growth been from same store sales with much of the expansion providing little boost to the top line????
Too much competition now chipping on the market share of SM?

Or has the ‘domestic demand’ in the real economy been faltering?
Yet if SM’s NGDP has been reduced to 7%, then what happens to the lesser ones?
Moreover, the growing slack in SM’s NGDP or consolidated current based revenue growth underscores that there must have been an outgrowth of excess supply or vacancies!!!

Has SM's 2015 performance been a confirmation of Robinson Land’s 5% vacancy rates????!!!
In the aftermath of the record PSEi, ast year I warned of the likelihood of the 2015 predicament7: (bold and italics original)
The nub: A lot of SM present activities have hardly been about profits but about the use of profits to justify incurring more DEBT. This comes even as the real economy has been materially slowing, regardless of what government G-R-O-W-T-H statistics says. SM’s topline numbers all support the ongoing slowdown.
Bingo!
*note SM has not released its official financial statements. The above are based solely on current press release and their previous financial statements.
SM’s Price Surge: An Upcoming SM Retail IPO?
 
So just why has SM’s equity prices made a vertical three day Cialis-like leap??? Or why the astounding 7.69% price surge for the week?

Given the ZERO net income growth, last week’s price surge translates to only massive multiple expansion or people panic buying in the hope to sell these to an even greater fool!

Yet the merger would be nothing but a legal and accounting exercise that will hardly account for a meaningful expansion of current financial conditions.

Given its scale, SM’s topline are ultimately DEPENDENT on economic conditions and on COMPETITION.
Yes SM’s topline debunks on the populist incantation of ‘strong domestic demand’ and of the government’s GDP numbers!
What the merger will likely entail is for SM Investments to have SM Retail listed at the PSE. And by selling shares to the public SM will benefit from a one time non-recurring windfall.

Moreover, by having SM Retail as a listed entity, this will give the SM group additional means to secure financing via the capital markets. Yes, it means access to financing independent of the parent.

Having more stories through more entities extrapolate to more avenues or expanded access to financing.
Yet how can SM have its retail arm listed with a premium when the overall market is down? A down market translates to ‘less’ confidence or diminished incentive for the public to subscribe to a highly priced IPO.
Or how can SM generate a windfall or premium from the prospective listing of SM Retail if parent SM’s stocks are down?
Something has to be done to make conditions propitious, right?

The answers to these questions could likely serve as drivers behind last week’s meltup of SM and the PSEi.
As predicted in January 2016, “since the elites have greatly benefited from the BSP inflationary boom, then I expect some of them to try to put up a passionate last stand to prop up the sham boom”.
Oh if SM’s faltering topline and income growth had been a belated consequence of the BSP’s 10 months of 30%+++ money supply growth in 2013-14, just watch what happens if M3 reaccelerates!
___

1 Wikipedia.org Fear of missing out
3 PLDT CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2015 AND 2014 AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
4 I wanted to plot PLDT’s topline numbers to establish a trend, unfortunately, PLDT changes its headline numbers. For instance in 2014’s total revenues was 170,835 based on 4Q 2015 report, that’s against 170,962 from their 4Q 2014 FS report. Mismatches can lead to distortions. So I just relied on current data
5 SM Investments SM Recurring Net Income Rises 13% in 2015 February 29, 2016
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