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%!
Yet
the domestic mining index has been up by only 6.29%. This only
confirms my views that the rise
in domestic gold miners has hardly been about the essence of gold—as
alternative money and as insurance against financial instability—but
as momentum for yield seeking casino gamblers.
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.
I
have previously pointed out how international
media’s darling in 2009 became an outcast in 2013. Today,
Brazil
has been paying for the sins she committed from her easy money boom
regime.
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 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”.
See
the you
tube experiment here
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!
Could
it be because SM plans to merge
all its retail holdings into the fold of SM retail?
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
2
See
Philippine
Bonds Close the Year with a Rally; Flattening Yield Curve as
Business Cycle Indicator December 29, 2014
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
6
SM
Investments SM
Posts 14.4% Growth in Recurring Net Income in 2014 March 4, 2015
