July 16, 2001

Speculation on SMC

The story today, as has been for a number of weeks now, is San Miguel. The conglomerate, which is one of two major players in the softdrink industry bidding for CBC's 25% market share was bought up by 7% to P53.50 - a level which we haven't seen in SMCB for a while. However, with the entire market just accounting for P377mn worth of trades (inclusive of crosses), it wasn't such a daunting task. For SMCB, all it took was P35.5mn to merit the uptick. And this wasn't even because of any fresh news. It was just pure speculation. There was however, an SMC disclosure pertaining to the company's extension of the tender offer period for shares of Pure Foods Corporation, until August 13, 2001. Incidentally, should SMC's bid for CBC prove successful, RFM will be left with Swift, which will now face the combined force of SMC Foods and Pure Foods, further clouding RFM's future assuming a complete divestment of CBC.

As for RFM, the company finally submitted its audited F/S to the PSE, thereby avoiding penalties from the exchange, such as suspension of trades. In its statement, the company said it managed an operating income of P550mn in 2000, but registered a net loss of P520 due to a large P1bn foreign exchange loss on its dollar-denominated convertible bonds. Despite the dampener news however, RFM still rode on speculation and gained 12.61% to P2.5.

With the index once again failing to close above the 1400 level, we would suspect that there should be a number of bargains among blue chips and second liners already. In our search, we found AC, which is already oversold with a daily RSI of 6.362. The issue declined P0.1 today to P6.7. The issue looks attractive at this level already. However, should it cover a gap at the P6.3 level, it becomes all the more compelling.

Bankard, albeit not having felt the spotlight since it was acquired by RCBC, looks technically attractive right now. It was untraded today and last closed at P1.3. Buy on weakness.

FPH, which managed another P1.5 gain today and closed at P33 is very overbought, as both daily and weekly RSIs would show. The issue may breakout past P35.50, but will most likely correct first. It should retrace to the P30 level.

LTDI looks like it's on the verge of a correction. Unchanged at P27 today, the issue may hit P30 in the next few weeks.