The Saga continues: what's next for C&P Homes (CMP - P4.05)
Last March, I wrote an article on C&P Homes entitled "Turnaround Saga - The C&P Homes Story" Please read: Turnaround Saga - The C&P Homes Story
I guess the saga has entered the "recapitalization" chapter. Yesterday, Vista Land - the new C&P Homes announced plans to raise P25.0bn in a follow-on offering. Please read: Villar Firm .
The next question is how the "recapitalization" chapter will unfold. To my mind, there is little to speculate about it and instead just read the writings on the wall. First, creditors of C&P Homes have agreed to convert their debt into equity at P8.0 per share. In other words, the debt was paid in C&P Homes shares valued at P8.0 each. I do believe that P8.0 is the accepted Net Asset Value (NAV) per share of the new company. I would put a lot of credence into the valuation since creditors have better access to the financials of the company. Second, in a filling with the Securities and Exchange Commission (SEC), Vista Land plans to offer 2.548bn shares at P10.0 per share. The P25.0bn offering will make it the biggest follow-on offering in the history. So clearly, the recapitalization chapter will likely see C&P Homes at P10.0 per share. If that happens, it will be a nice epilogue to the turnaround saga.
However, beyond the play on C&P Homes, the bigger picture is the overall property bull market which a lot of people are still skeptical. I guess, with P25.0bn that will flow into the sector, there is really no reason why we should not follow where the billions are going. Also, the C&P Homes turnaround strategy will likely be the model for Fil-Estate Land (LND - P1.04). I will write more about LND in the coming days.
I guess the saga has entered the "recapitalization" chapter. Yesterday, Vista Land - the new C&P Homes announced plans to raise P25.0bn in a follow-on offering. Please read: Villar Firm .
The next question is how the "recapitalization" chapter will unfold. To my mind, there is little to speculate about it and instead just read the writings on the wall. First, creditors of C&P Homes have agreed to convert their debt into equity at P8.0 per share. In other words, the debt was paid in C&P Homes shares valued at P8.0 each. I do believe that P8.0 is the accepted Net Asset Value (NAV) per share of the new company. I would put a lot of credence into the valuation since creditors have better access to the financials of the company. Second, in a filling with the Securities and Exchange Commission (SEC), Vista Land plans to offer 2.548bn shares at P10.0 per share. The P25.0bn offering will make it the biggest follow-on offering in the history. So clearly, the recapitalization chapter will likely see C&P Homes at P10.0 per share. If that happens, it will be a nice epilogue to the turnaround saga.
However, beyond the play on C&P Homes, the bigger picture is the overall property bull market which a lot of people are still skeptical. I guess, with P25.0bn that will flow into the sector, there is really no reason why we should not follow where the billions are going. Also, the C&P Homes turnaround strategy will likely be the model for Fil-Estate Land (LND - P1.04). I will write more about LND in the coming days.
posted by jack galt at
10:45 AM
2 Comments:
What is your take in the light of the offer price of P6.8533 of Vista Land visavis its intrinsic value and the size of the offering? Will you recommend to subscribe? What is your price target for VLL? Thanks Sir Jack Galt and more power to you!
By
cocoy71, at 8:13 AM
Yes. I will definitely subscribe at these levels. Vista Land (VLL) is now a different animal compared to C&P Homes.
Investors are hesitant to subscribe to the offering because of the poor performance of Aboitiz Power (AP)
and the "C&P Homes debacle" during the 1997 financial crisis.
So lets put things in perspective. First, AP was offered at a premium to the utility/power sector. So this means that investors are better off buying other cheaper utility counters like Meralco, Manila Water, First Generation which trades at 20% discount to AP's offering price. So naturally, the market is just correcting the disparity. Besides, its parent - Aboitiz Equities (AEV) never traded at a premium. So from the start, you know the listing will be a dud. On the other hand, the C&P Homes stigma is not unique to VLL. Most indebted companies went through that. So it is unfair to single out C&P Homes. We can mention others that fared even worst and still has not recovered from the crisis. On the other hand, we also saw what happen to companies that have successfully undergone rehabilitation. Think Benpres (BPC), Meralco (MERB).
My price target for VLL is P8.0-P10.00. This has been my target since I recommended C&P Homes last February. Vista Land is expected to make P3.5bn net income this year. This translates to a Price Earnings Ratio (PER) of 18x to 12/07 earnings. Both Megaworld (MEG) and Filinvest Land (FLI) trades at 30x to 12/07 earnings. Assuming VLL trades at 25x PER, this should translate to P9.40 per share. I feel that 25x is a fair PER vis-a-vis MEG and FLI. Besides, we are just at the beginning of the property bull. I expect further re-rating of the sector.
Note that after the offering, VLL will have a net cash position of P8.0bn and roughly 1,100 ha. of landbank to develop. So the turnaround chapter is definitely in play now.
By
jack galt, at 11:29 AM
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