Questions from my readers; MWC (P7.60) and ELI (P0.45)
I would like to take this chance to answer some questions from my readers.
What do I do with Manila Water (MWC)? Its share price has rallied to P7.90. Should I buy, sell or hold? What is the impact of the Maynilad bidding to the stock? The_black_magic
I remain bullish on MWC. I believe the stock will continue to outperform the market. At current levels, MWC is trading 7% off its high of P8.20. Considering that the Phisix has corrected 16% from its peak, there is really nothing to be worried about. There is a basic rule in investing that says: sell the losers; hold on to the winners. Obviously, MWC is a winner and there is no reason selling the stock.
Aside from being a winner, I also like MWC since the stock is still trading below its intrinsic value. Please check http://bigbigtrade.blogspot.com/2006/05/why-i-will-buy-manila-water-mwc-p650.html . Utility stocks, like MWC, are considered as “boring plays” since earnings are supposed to be steady and predictable. Thus upside will be limited. However, I will not think twice if I can find a utility counter – like MWC, trading at 7.7x PER and growing at 24% per year. The market is simply paying too little for its growth prospects. At current valuation, MWC is trading at .32x Price/Growth (PEG). A more logical valuation should put the stock at .80x PEG or equivalent to 20x PER. That’s a lot of upside for a steady earner like MWC.
On the other hand, it is still quite early to speculate on the possible impact of the Maynilad bid. However, initial reports says that MWC is in the best position to win concession based on its track record in successfully running the east zone water franchise. Should MWC win the bid; that will be a new story to watch out. Stay tuned.
Can you please write something about Empire East (ELI) in your blog? Slick
I have nothing good to say about ELI. In fact, I am quite suspicious about it’s P1.0bn stock buyback program that was announced last April.
Please note that we saw a spike in the share price of ELI after they announced the buyback. The share price reached a high of P0.70 in 3 days. However, after the initial euphoria, the stock underperformed the market. What is even suspicious is that during the huge market rally that we saw last May when the PSEi reached record highs, the share price of ELI did not even budge. Worst, when the market tanked, the share price even outperformed the market on the downside.
Looking at the disclosure of the company, it seems that the last buyback that the company did was on May 26. That was almost 2 months ago. Besides, if you add up all the buybacks that the company disclosed since the announcement, it hardly adds up to P50m – or roughly 5% of the committed amount.
So is the company really serious in its buyback program? Do they have funds to do the buyback? Is the announcement just a grand plan to favor a few market players? An honest to goodness buyback program should see ELI buying their shares over time regardless of the market condition. That’s the essence of a buyback program! In my opinion, there seems to be no program at all.
What do I do with Manila Water (MWC)? Its share price has rallied to P7.90. Should I buy, sell or hold? What is the impact of the Maynilad bidding to the stock? The_black_magic
I remain bullish on MWC. I believe the stock will continue to outperform the market. At current levels, MWC is trading 7% off its high of P8.20. Considering that the Phisix has corrected 16% from its peak, there is really nothing to be worried about. There is a basic rule in investing that says: sell the losers; hold on to the winners. Obviously, MWC is a winner and there is no reason selling the stock.
Aside from being a winner, I also like MWC since the stock is still trading below its intrinsic value. Please check http://bigbigtrade.blogspot.com/2006/05/why-i-will-buy-manila-water-mwc-p650.html . Utility stocks, like MWC, are considered as “boring plays” since earnings are supposed to be steady and predictable. Thus upside will be limited. However, I will not think twice if I can find a utility counter – like MWC, trading at 7.7x PER and growing at 24% per year. The market is simply paying too little for its growth prospects. At current valuation, MWC is trading at .32x Price/Growth (PEG). A more logical valuation should put the stock at .80x PEG or equivalent to 20x PER. That’s a lot of upside for a steady earner like MWC.
On the other hand, it is still quite early to speculate on the possible impact of the Maynilad bid. However, initial reports says that MWC is in the best position to win concession based on its track record in successfully running the east zone water franchise. Should MWC win the bid; that will be a new story to watch out. Stay tuned.
Can you please write something about Empire East (ELI) in your blog? Slick
I have nothing good to say about ELI. In fact, I am quite suspicious about it’s P1.0bn stock buyback program that was announced last April.
Please note that we saw a spike in the share price of ELI after they announced the buyback. The share price reached a high of P0.70 in 3 days. However, after the initial euphoria, the stock underperformed the market. What is even suspicious is that during the huge market rally that we saw last May when the PSEi reached record highs, the share price of ELI did not even budge. Worst, when the market tanked, the share price even outperformed the market on the downside.
Looking at the disclosure of the company, it seems that the last buyback that the company did was on May 26. That was almost 2 months ago. Besides, if you add up all the buybacks that the company disclosed since the announcement, it hardly adds up to P50m – or roughly 5% of the committed amount.
So is the company really serious in its buyback program? Do they have funds to do the buyback? Is the announcement just a grand plan to favor a few market players? An honest to goodness buyback program should see ELI buying their shares over time regardless of the market condition. That’s the essence of a buyback program! In my opinion, there seems to be no program at all.
posted by jack galt at
5:26 PM
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