The Benpres (BPC – P1.12) Bet; What’s Brewing Sir?
Something is brewing in Benpres! For the past two weeks, the volume turnover of the stock has reached 4x its daily average. It is quite an unusual behavior considering that for the past 18 months, the stock has traded at a range of P0.90 – P1.24 with steady volume. We have not seen this surge in volume ever since the share price of Benpres broke out of the P.80 levels in the early 2005. Recall that Benpres was the darling in 2003 when its share price rose from P0.11 to P0.80.
What’s happening? At this stage, we can only speculate – however, I am willing to place my bet since money flow is “pretty good” at this stage. Again – like RCBC (RCB – P18.75), it is one of the “win-win” stocks that merits my attention. On the downside, I can easily get out at a minimal – say 10%, loss since the stock is well supported at the P1.0 levels. On the upside, the “money-flow” speaks for itself. In other words, money talks! It looks like “insiders” are voting with their checkbooks. So the odds are pretty much skewed towards a surprise development.
So, how far can the stock run? Let’s do a rough estimate of the company’s Net Asset Value (NAV). As of end Q206, this is how the assets and liabilities statement of Benpres looks like:
Listed Equities:
ABS-CBN 56% P9.7bn at market value
FPH 44% P11.3bn at market value
Unlisted
FPIDC - 49% P7.3bn at 10x 2005 Income
Sky Vision 22 P0.2bn book value
Rockwell 25 P1.5bn at NAV
Others P1.0bn 50% off carrying cost
Less
LTCP P2.0bn
USD$ Notes P7.9bn
Bayantel P15.8bn
Total P5.6bn
NAV P1.24
At current levels, the NAV of Benpres is at P1.24 per share. So, there seems to be very little room for upside if we based it on NAV play. But, as mentioned, we are speculating on a “surprise” development based on the movement of the stock. Since Metro Pacific (MPC – P0.245) already announced that they are not interested in FPIDC, my next bet is that there might be a deal brewing in Bayantel. Note that Benpres is liable for up to P15.8bn in its telco subsidiary. This is due to the unconditional guarantee that the company gave in 1997 to the creditors of Bayantel. Thus, roughly ¾ of Benpres’ net assets are effectively tied up with Bayantel’s liabilities. This translates to P3.00 per share impact on the NAV of Benpres. Any deal that will remove Bayantel from its books will be positive for Benpres.
How will the deal work out? Your guess is as good as mine? Essentially we are speculating on a possible P3.0 incremental gain in its NAV. Assuming, Benpres gets to recover “just” 1/3 or P5.0bn from its Bayantel fiasco, this should translate to P1.12 per share gain in its NAV. On a risk reward standpoint, my downside is 12% at P1.00 while the potential upside is P2.24 or equivalent to 100% return from current levels. The odds are definitely worth looking into. So what’s brewing, Sir?
What’s happening? At this stage, we can only speculate – however, I am willing to place my bet since money flow is “pretty good” at this stage. Again – like RCBC (RCB – P18.75), it is one of the “win-win” stocks that merits my attention. On the downside, I can easily get out at a minimal – say 10%, loss since the stock is well supported at the P1.0 levels. On the upside, the “money-flow” speaks for itself. In other words, money talks! It looks like “insiders” are voting with their checkbooks. So the odds are pretty much skewed towards a surprise development.
So, how far can the stock run? Let’s do a rough estimate of the company’s Net Asset Value (NAV). As of end Q206, this is how the assets and liabilities statement of Benpres looks like:
Listed Equities:
ABS-CBN 56% P9.7bn at market value
FPH 44% P11.3bn at market value
Unlisted
FPIDC - 49% P7.3bn at 10x 2005 Income
Sky Vision 22 P0.2bn book value
Rockwell 25 P1.5bn at NAV
Others P1.0bn 50% off carrying cost
Less
LTCP P2.0bn
USD$ Notes P7.9bn
Bayantel P15.8bn
Total P5.6bn
NAV P1.24
At current levels, the NAV of Benpres is at P1.24 per share. So, there seems to be very little room for upside if we based it on NAV play. But, as mentioned, we are speculating on a “surprise” development based on the movement of the stock. Since Metro Pacific (MPC – P0.245) already announced that they are not interested in FPIDC, my next bet is that there might be a deal brewing in Bayantel. Note that Benpres is liable for up to P15.8bn in its telco subsidiary. This is due to the unconditional guarantee that the company gave in 1997 to the creditors of Bayantel. Thus, roughly ¾ of Benpres’ net assets are effectively tied up with Bayantel’s liabilities. This translates to P3.00 per share impact on the NAV of Benpres. Any deal that will remove Bayantel from its books will be positive for Benpres.
How will the deal work out? Your guess is as good as mine? Essentially we are speculating on a possible P3.0 incremental gain in its NAV. Assuming, Benpres gets to recover “just” 1/3 or P5.0bn from its Bayantel fiasco, this should translate to P1.12 per share gain in its NAV. On a risk reward standpoint, my downside is 12% at P1.00 while the potential upside is P2.24 or equivalent to 100% return from current levels. The odds are definitely worth looking into. So what’s brewing, Sir?
posted by jack galt at
7:24 PM
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