The Phisix Jinx In Motion…
Again, PSE officials can’t help but indulge in a shindig even when the Phisix has YET to make a breakthrough into new records. When the Phisix hit 8,071.47 on July 28, the PSE’s press release noted correctly that this was a “one year high” and also that this was the “highest for the index since July 27, 2016, when the PSEi finished at 8,100.48”.
Intuitively, such eulogizing had been alluded by the PSE to “positive investor sentiment ahead of the release of second quarter earnings results”.
It is as if earnings had anything to do with the THIRD most expensive stock market in the world
PRICES are EVERYTHING!
And because of record price highs, PSE officials likewise feted SM Prime as “the first Philippine listed company to record a one trillion-peso market capitalization in the history of the Philippine stock market during a simple ceremony”.
Even after this week’s 2.86% retrenchment, SMPH’s PER (eps 2016) stands at a staggering 41.16!!! Here is SMPH’s quote page at the PSE’s website. Even if we apply the annualized 1Q 2017 PER, SMPH retains the mind-boggling obscene valuation of 37.12!
It has never been a concern how the Sy Group of companies had signified as the major beneficiaries of rampant pumping including marking-the-close
For PSE officials, instability is divinity. The end justifies the means.
All told, like 2015 and 2016 such institutional worship of asset bubbles seem to signal its culmination
Media Censors BDO’s Earnings Drop
Oh, more proof that the stock market has hardly been about G-R-O-W-T-H!
BDO was the first of PSEi 30 firm that presented its 2Q and 1H performance. Stunningly, when presented in media like this,this and this, everything was at least positive.
The country’s leading lender BDO Unibank chalked up P13.3 billion in net profit in the first six months, little changed from the same period last year on lower trading gains and one-off items from the acquisition and consolidation of subsidiaries.
Underneath the facade, there appears to have been a deliberate omission of many critical factors
For instance, 2Q profits DROPPED by 4.12%!! Such drop in 2Q earnings led to the unchanged profits in the first semester. But again, such decline never seemed to have existed.
Even more, earnings per share DIVED in both 1H (-10.62%) and 2Q (-14.71%). That was mainly from the Php 60 billion stock rights offering (SRO) that was held in January.
Curiously this eps decline has duly been noted under the comprehensive income category of the BDO’s management and discussion:
“Basic earnings per share went down P 0.36 year on year to Php 3.03 for the first half on a larger number of common shares outstanding due to SRO
Though stock rights don’t affect income statement directly, the additional number of shares issued from SROs has a dilutive effect, which naturally reduces the eps!
But like the 2Q performance, BDO’s SRO seems to have happened in a vacuum!
In fact, BDO share prices soared by 2.0% this week to hit an all-time HIGH at Friday’s close! It has all been about prices.
Dilution, thus, has been NO MORE!
Perhaps BDO’s offering of Php 5 billion long-term negotiable certificates of deposit (LTNCD) could have impelled for the public sterilization of the firm’s financial conditions.
This offering essentially signifies FREE lunch for BDO.
BDO’s LTNCD has interest payments that are about CPI rates! The public thereby would be subsidizing BDO with free money, but would also bear the burden of the risks attendant to such long-term CDs!
So when financial performance has been bleak, there will be less enthusiasm to participate in such wealth transfer mechanism. Media, therefore, has to project only G-R-O-W-T-H!
This offering could likewise have served as the reason behind the push to record high prices of BDO shares: to signal to the public that everything has been hunky dory!
Eerily, such public raising of funds would account for the second (after the SRO and now LTNCD) this year!
Courtesy of the BSP, stock prices have now been used as a marketing tool for implicit wealth transfers!
1Q PSE and Listed Firms Performance at Par with CPI rates!
Let me further note that the PSE released the performance of listed firms in their June 2017 report.
The PSE noted that eps of PSEi 30 grew only by 3.9% while all listed firms registered a 2.5% growth. Ironically, these growth rates had almost been at par with the 1Q CPI rate of 3.2%, based on BSP data.
While the inflation rates did boost the top line, apparently, operating costs were adversely affected too. As I have noted here many times, an inflationary environment has hardly been helpful to corporate earnings.
Think of what would have happened if the BSP’s emergency measures were not in place.
As a side note, the PSE seemed to have arrived at these numbers, not from earnings, but from published profits computed from the average.
Yet the Phisix went berserk to surge by 6.9% while the all shares raked in 5.8% over the same period. In other words,returns effortlessly trounced earnings by 76% for the Phisix and by 132% for the ALL shares!
You see, share prices of listed firms have not been permitted to reflect on their actual earnings. Share prices have been aggressively bid or have vastly outperformed their respective earnings performance. Thus, earnings essentially have a smidgen of relevance to their pricing.
Even more, the almost daily brazen pumps and dumps have certainly added to mounting imbalances in pricing, values and capital deployment in the real economy.
And as a function of causality, the metastasizing of the stock market into a loaded casino has been the primary reason why the Phisix has become the MOST expensive in Asia and the third MOST expensive in the world!
And as a function of causality, the primary reason why the Phisix has morphed into the MOST expensive in Asia and the third priciest bourse in the world has mainly been from metastasizing of the stock market into a loaded casino!
While many believe in free lunches, the paradox is, we live in a world of scarcity.
Something will have to give.
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