Booming Property Stocks??? Not So Fast. Boom Has Mainly Been About SMPH!

Déjà vu 2015?

The property index soared by 4.85% this week to lead all sectors higher (see lower right window).

The property sector was also key to the weightlifting of the Phisix to 7,850.

 

SMPH’s phenomenal weekly +8.05% VERTICAL run played a crucial role in the property sector and the PSEi’s outperformance! EIGHT PERCENT for a week!

SMPH closed at a fresh record high at 32.2! Parent SM registered a vertical run +6.32 weekly to set new highs too!

What a stunning sign of financial instability: 8.05% and 6.32% returns for the most liquid firms with hardly any significant fundamental altering news or developments!

Nevertheless, all three PSEi property firms namely ALI (+3.97%) and the peripheries MEG (+3.46%) and RLC (+1.36%) were up.

And because of the vertical price ramp, the Phisix, as of Friday, has been off just 3.5% from the April 10, 2015record at 8,127.48.

Meanwhile, the property index still maintains a significant 7.42% distance from its August 2016 high. Year to date, while the Phisix was up 14.64%, the property index increased by only 13.73%.

These numbers show that the property sector has patently UNDERPERFORMED the Phisix

The property index constitutes the PSEi’s third largest sector, after the holding firms and the financials.

Or the key question: why the disparity between the former industry leader and the Phisix?

As a side note, SMPH’s share prices have increased by 13.58% year-to-date or 3.2% per month even as 1Q 2017 earnings had been up by about the same rate (+13.4%). Annualized the current yield would extrapolate to 38.34%! And despite the immense additions to capacity, SMPH’s rental revenues grew by only 12.26% while real estate revenues were higher by only 6.8%! Signs of diminishing returns?

So unless there will be a surge in earnings over the next three-quarters, SMPH will not only have FULLY PRICED this year’s earnings, but returns will piggyback on the previous high expectations on earnings thatfailed to materialize over the past years, ergo, the pricey PERs!

Through an upright price thrust, SMPH set a new price record this Friday.

But how about the rest, have they been participating in SMPH’s vertical run?

 

Well partly yes and mostly no.

ALI like the SMPH joined the party in late 2016 to early 2017 (upper window).

However, in contrast to its predecessor of early 2016, ALI appears to have hit a wall and has drudged to participate in the forcible push of the Phisix to the present levels.

Based on Friday’s prices ALI was off by 12.62% from its August 2015 record high even as the Phisix is just a breath (3.5%) away from another milestone!

The question is WHY has ALI trailed?

Meanwhile, RLC and MEG rocketed only from their respective NEW lows concomitant with the PSEi’s breakout from 7,400. But these issues remain significantly away from their respective record highs. While both may repeat the 2016 run, like ALI, they have severely fallen behind the vertical rally.

To the contrary, vertical climbs from new lows are likely indicators of a dead cat’s bounce.

So while all three may help in the interim forced pumping of the PSEi, up to what point until prices of these firms meet exhaustion?

It’s not just the PSEi 30 property firms.

Even worse has been the LANGUID performance of the broader property markets!

Or MOST of the firms which comprise the property index have either lagged or have been non-participants of the rally.

Here is the first batch…

 

Only BRN and BEL have shown SOME signs of life. The other FOUR, namely ARA, CPG, CYBR and DD appear to have parted ways from the perceived general trend!

What is popular perceived has hardly been true!

Here’s the next batch…

 

Let me just change the symbols into the same statements I used above.

Only FLI and VLL have shown SOME signs of life. The other FOUR, namely GERI, HOUSE, PRMX and SLI appear to have parted ways from the perceived general trend!

Of the four that have shown some hints of improvements, 2 were spikes, 1 (VLL) appears to be tailing off, and only BEL appears to have demonstrated some significant upside action.

In short, EIGHT of the 12 or 67% of the non-PSEi 30 property issues but are part of the property index were NON-participants of the recent rally!

Yet for the three that had shown slight signs of vim, such interim spikes hardly constitute a trend!

But yes, there are property issues that flew ala SMPH!

 

The FOUR issues, namely MRC, CDC, ALCO and RLT are mostly third tiers/liners or speculative outfits. These firms have morphed into OBJECTs of manic compulsive casino like pumping! Their respective share prices have largely careened away from fundamentals!

I’d like to add charts of two high-end property firms to exhibit, once again, the non-participation (SHNG) and ambiguous rallies (ROCK).

Here are more issues that I have not included in the charts.

EVER, which has emerged from a recent low, has shown a weak uptrend.

PHES has posted FLI-BRN like interim spike.

CEI, STR and SUN have flat-lined, whereas LAND ALHI and IRC have been in falling (bear) markets

So SMPH, presently, signifies an OUTLIER! It is the EXCEPTION than the rule! 

In 2015, as the PSEi soared to 8,127.48 in April, I pointed out that – curiously - almost half of the listed issues were in either a bear market or in a state of stasis.

Current activities have almost been a reprise of 2015!

Here’s the thing. Broader markets won’t be as vulnerable to the gaming of the market system compared to the PSEi 30.

So, the ostensible divergence between SMPH and the rest of its contemporaries should serveadditional circumstantial evidence of the sustained brazen manipulations of the Phisix!

So unless the run in the PSEi will diffuse into the broader markets or get more participation, such inability to accomplish the “rising lifts all boats” dynamic should entail that non-participants would likely become an eventual drag on the index, as well as, on these pseudo leaders/outliers. 2015 should serve as a paragon.

I have no idea who or what group is behind the facelifting of the PSEi. Clues only point to the parts of the industry.

Yet, the more thing change, the more they stay the same.

Bottom line:

It is not my intention to predict on price levels, given that the Phisix has hardly been governed by the profit incentive but by rampant price fixing.

Said differently, it truly doesn’t matter whether 8,100 will or will not be taken out. Instead, my dialectic propounds on the quality or the substance of the recent run. Or this is meant to examine the state of the market process.

Falsification of prices is no free lunch. Ultimately, such actions have consequences. And as history has shown, all accounts of major vertical prices over the past 50 years were subjected to mean reversion. Do the above facts point to this time is different?