June 5, 2001

CONVERGENCE CRASH

Today's trading was marked by another extraordinary performance by PLDT, on the downward side that is. Shedding another P30 following its ADR's $0.48 decline to $12.74 last night, PLDT closed at P610, a six-year low for the issue. The issue may have been dragged down by its loss-making subsidiary Piltel. The latter announced that it has satisfied all the conditions necessary for its debt restructuring. To recall, PLDT has pledged to cover half of Piltel's debts via issuance of convertible bonds to Piltel's creditors. The anticipation of additional financial burden for PLDT may have partly caused the issue's decline.

Another notable decliner for the day was MERB which shed 5.13% to close down at P55.5. The company, which is an expected beneficiary of the newly passed power reform bill, was sold at the news. It's "A" shares were likewise dragged down by a smaller 2.44% to close at P40. Another company that would be directly affected by the power bill is AEV. The issue in contrast gained subtly by P0.04 to P1.66. The issue's collective gain however since April has not all been subtle. It soared by over 50% during the period, compared to the index which just managed over a 1% rise for the same period.

However, AEV is not by far the best-performing issue of recent weeks. That distinction would belong to ICT, which again for the same period has gained over 145%, rising from P1.12 to P2.8. The buzz on ICT apparently was its sale of its 25% stake in ICTSI International Holdings Corporation (IIHC) and its Mexican passenger cruise terminal to Hutchinson International Port Holdings Ltd. (HPH). ICT's founder shares are granted 10 votes per share. The sale thus transfers controlling interest to Hutchinson. ICT will likewise grant HPH an option to acquire the preference B shares that its wholly-owned subsidiary International Container Terminal Holdings, Inc. (ICTHI) owns. Lastly ICTHI will also sell interest in Ensenada Cruiseport Village S.A. de C.V. which operates a cruiseport in Ensenada, Mexico. We thus attribute the renewed interest in the stock to its potential gains in the sale, not to mention the improved liquidity picture of the company.

And so it seems that liquidating assets is the order of the day. We've also heard the same story from BPC, which is saddled with foreign currency debts, as well as RFM which has sold its profitable and sexy subsidiary PSi Technologies. BPC was unchanged at P1.48, while RFM continued its fortunate streak with a 3.51% gain to P1.18.

Not all issues however can resort to selling assets in the name of focusing on core businesses. Music.com, once Music Corporation's most exciting angle has failed to secure another round of funding from its majority shareholders. In effect, Music Corporation just infused new equity to the portal just for the latter to be able to wind down its operations. Surprisingly though, MUSX even gained 4.5% to P2.32, retracing its recent steep losses. Perhaps what helped MUSX dispel concerns was that it disclosed that it had written off Music.com already, and commenting that it will not significantly affect its financial position.

ABS, which we had suspected of planning a share buyback in order to lessen the BPC's dilution upon the conglomerate's sale of 8% of its stake in ABS, announced that it will not buy back the whole 8% after all. The company clarified that its board of directors only approved the repurchase of 10mn common shares or its equivalent in Philippine Depositary Receipts for the employee stock option plan. An earlier claim by the company however is that the repurchase is precisely to prevent BPC's dilution as well as the support of the company's shares, which ABS believes is undervalued. ABS closed unchanged at P38.