“Casino Royale”: some chips that are worth betting on; buyers beware
Today the PSEi broke past the 3,100.0 levels to close at 3,141.3. What this signifies is that the market is entering a new “run”. As mentioned in my earlier post Bull Running on 4 Legs, this is an affirmation that the bull is running on all 4 legs. The “footprints” are clearly marked in the bull’s pathway. Foreign fund managers, local institutional investors, local market players and retail punters have joined the run.
However, what’s evident today is that Empire East (ELI – P0.72) broke out of its long consolidation phase. I consider ELI as a proxy for retail money. Once, ELI moves, we should see funds flowing to the punter’s chips. So, the next leg of the market will likely see strong activity from retail money with punter’s chip taking the center stage.
Amongst the punter’s chips, my top two bets are Fil-Estate Land (LND – P0.85) and Boulevard Holdings (BHI – P0.28). There is nothing great about these two chips but as the saying goes: “Every dog has its day”.
My key argument in “speculating” on these two companies is that the worst is over for them and it seems that management have a “move forward” plan that will “likely” enhance shareholder value in the future. Besides, there is still enough upside to speculate based on their “stories”
LND recently announced that it is negotiating for a US$12.5m construction loan to complete P2.5bn worth of leisure/high-end projects. It also got LIM Asia – a real estate specialist fund in Asia Pacific to invest US$5m into the company. While the amount involved is negligible, it is a small “first” step for the company towards rehabilitation. LND also claims to have 1,000 ha. of landbank. This will be valuable in nursing the company back to full recovery.
However, what really attracts me is that at current levels, LND is trading at 75% discount to its book value of P3.45/share. This means that we are paying a mere P0.25 for every P1.0 of net asset. We are essentially coming in at the same footing as other “vulture” funds that would have paid the same valuation. I guess with the stockmarket trading at 10-year highs, there is a strong chance that real estate assets will start to appreciate. My gut feel is that near term, LND can easily trade at 50% discount to its book – equivalent to P1.72 per share.
As for BHI, I like the stock because of its relatively small market capitalization – P290m. The stock has the potential to emerge as a punter’s favorite. Beyond that, I also think that its investment in Friday’s Boracay Resort is easily worth more than P300m. Friday’s Boracay has one of the highest room rates in the region despite its so-so facilities compared to other resorts in Asia. It shows that it has retained its franchise value despite the numerous resorts that have sprouted in the area. From my estimate, Friday Boracay generates around P180m revenues and contributes roughly P40m to BHI’s bottomline.
Recently, BHI announced it would increase its capitalization to finance the construction of a second hotel in Puerto Gallera. Most likely, a capital call is in the pipeline. So we should see more market making activities on the stock in order to make the rights offering more attractive.
Finally, as I have mentioned these are speculative chips. So buyers beware and punt at your own risk.
However, what’s evident today is that Empire East (ELI – P0.72) broke out of its long consolidation phase. I consider ELI as a proxy for retail money. Once, ELI moves, we should see funds flowing to the punter’s chips. So, the next leg of the market will likely see strong activity from retail money with punter’s chip taking the center stage.
Amongst the punter’s chips, my top two bets are Fil-Estate Land (LND – P0.85) and Boulevard Holdings (BHI – P0.28). There is nothing great about these two chips but as the saying goes: “Every dog has its day”.
My key argument in “speculating” on these two companies is that the worst is over for them and it seems that management have a “move forward” plan that will “likely” enhance shareholder value in the future. Besides, there is still enough upside to speculate based on their “stories”
LND recently announced that it is negotiating for a US$12.5m construction loan to complete P2.5bn worth of leisure/high-end projects. It also got LIM Asia – a real estate specialist fund in Asia Pacific to invest US$5m into the company. While the amount involved is negligible, it is a small “first” step for the company towards rehabilitation. LND also claims to have 1,000 ha. of landbank. This will be valuable in nursing the company back to full recovery.
However, what really attracts me is that at current levels, LND is trading at 75% discount to its book value of P3.45/share. This means that we are paying a mere P0.25 for every P1.0 of net asset. We are essentially coming in at the same footing as other “vulture” funds that would have paid the same valuation. I guess with the stockmarket trading at 10-year highs, there is a strong chance that real estate assets will start to appreciate. My gut feel is that near term, LND can easily trade at 50% discount to its book – equivalent to P1.72 per share.
As for BHI, I like the stock because of its relatively small market capitalization – P290m. The stock has the potential to emerge as a punter’s favorite. Beyond that, I also think that its investment in Friday’s Boracay Resort is easily worth more than P300m. Friday’s Boracay has one of the highest room rates in the region despite its so-so facilities compared to other resorts in Asia. It shows that it has retained its franchise value despite the numerous resorts that have sprouted in the area. From my estimate, Friday Boracay generates around P180m revenues and contributes roughly P40m to BHI’s bottomline.
Recently, BHI announced it would increase its capitalization to finance the construction of a second hotel in Puerto Gallera. Most likely, a capital call is in the pipeline. So we should see more market making activities on the stock in order to make the rights offering more attractive.
Finally, as I have mentioned these are speculative chips. So buyers beware and punt at your own risk.
posted by jack galt at
7:06 PM
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