Bailing outBy the staff
Philippine Daily Inquirer
A few years ago, a businessman put up a dot-com firm thinking he would give the established players a run for their money. His thinking was that, if he hired the best in the industry, paid them top money and invested in the latest equipment, his dot-com would be a winner.
His people were made to believe they were going to make a mark in the industry in a short time—they were going to be the best in their class and they were going to make money. Interestingly, this businessman (with his rather “interesting” track record) wanted to keep his ownership in the dot-com a secret, probably because it could affect its value. This is the reason why several billionaires have been rumored to be the dot-com’s secret financier.
Fast forward to the present and the dot-com is wallowing in red ink and the venture is barely known outside of a small hardcore group. The businessman is now offering his stake in the dot-com for P2 billion, but even Pawn Stars’ Chumlee would not be fooled into buying this hopeless venture.
Our buzzard, who was approached by the businessman, reckoned that the dot-com has virtually no enterprise value and, for a fraction of the P2-billion sale price, practically anyone could come up with a much better product and without the overpaid staff.
So who is this businessman? Clue: His initials are in our column title. Gil Cabacungan
‘Robin Hood’ shampoo sales
When it comes to selling so-called “fast moving consumer goods” (FMCG), conventional wisdom dictates that it is cheaper to buy larger packages than small ones.
Traditionally, buying shampoo in sachets, for example, has long been more expensive once all those little packages are added up than, say, buying a single large bottle. Packing in smaller quantities also consumes more material, time and labor, ergo it entails higher costs.
Of course, the other rationale for sachet packaging is that the limited cash flow of less affluent consumers allow them to buy only small sachets of shampoo or small bars of soap at a time, while more affluent ones can afford to purchase bigger packages.
What if we told you that the country’s largest FMCG firms have recently turned this equation around? Yes, our sources tell us that the biggest manufacturers of soap and shampoo like Unilever and Procter & Gamble have, in fact, been using a pricing scheme where sachets are cheaper by volume than larger packages.
In fact, we took a recent trip to several supermarket chains and randomly picked a shampoo product—Pantene shampoo, for the purpose of our experiment—and found that six sachets of 10 milliliters (ml) each retailed at P26 at SM Supermarket for an average cost of P0.43 per ml. In contrast, a 170 mL bottle of the same shampoo costs P104.75, for an average cost of P0.62 per mL. A 340 ml bottle costs P183.75 (P0.54 per ml) and a 670 ml bottle sells for P340.79 (P0.51 per ml). The same trend was observed in the supermarket chains of Robinsons, Puregold and Ever Supermarket.
(We heard Unilever recently adjusted its pricing policy to follow the more conventional model, but P&G is supposedly sticking to its guns.)
It seems more affluent consumers—who instantly assume that larger packages are the cheapest without giving prices a second look—are bearing the brunt of this unusual pricing. More importantly, the trends indicate that the FMCG manufacturers earn the highest margins not from the poor or the rich, but from the middle class. Daxim L. Lucas
Paved with Italian tiles
The Aquino administration is finally clamping down on smuggled tiles. No thanks, however, to the guys at the Bureau of Customs who continue to tolerate this illicit trade despite their supposed allegiance to their boss’ “tuwid na daan” mantra.
Trade and Industry Greg Domingo has reportedly asked the Bureau of Product Standards to conduct a post audit of all tile importers in the country to validate whether the BOC is charging them the correct tariff rates.
Our buzzard tells us that a handful of local tile importers have made a killing rerouting their Italian tile imports to Hong Kong to make it appear that they came from China.
Since BOC agents could not tell the difference between an Italian or a Chinese floor tile, they just base the duties on the official paper which accompanies these smuggled goods. With documents certifying that these came from China, the importers get off paying only a third of the duties they would have been charged for the premium floor tiles.
The road to Ferraris, trophy girlfriends and social climbing is indeed paved with good Italian floor tiles. Gil Cabacungan
‘Doing a Ronnie’
An economic analyst and foreign investment advocate from the Land Down Under is reportedly inching closer to becoming a Filipino citizen, that is, if Congress passes a bill conferring him the gift of citizenship with just a few session days to go.
Biz Buzz sources say that the father and son tandem of Sen. Manny and Rep. Mark Villar are racing against time to have the bill passed, raising not a few eyebrows in the process.
For one, some observers note that this “midnight” bill—coming at the closing hours of the 15th Congress—may even be tackled before more urgent measures like the Freedom of Information bill and amendments to the Anti-Money Laundering Act, which are still struggling in the legislative mill.
But the father-and-son team appear determined, extolling the supposed virtues of the Pinoy citizenship aspirant.
In fact, the House Committee on Justice headed by lead Corona impeachment prosecutor Niel Tupas Jr. reportedly led the passage on third reading of the controversial citizenship measure. It is now awaiting action by the Senate.
While the Aussie analyst is widely known in business circles for his no-nonsense, no-holds barred writing style, pro-administration lawmakers are aghast that someone who supposedly backed Villar during the last presidential election would be granted citizenship via legislative fiat instead of the naturalization process.
One Biz Buzz source said that declaring the analyst a Filipino reminded him of the Martial Law-era Presidential Decree of the late President Marcos granting citizenship to Sri Lankan sportscaster Ronnie Nathanielsz. Daxim L. Lucas
Businessman Alfredo Yao promised to give a discount in pricing the initial public offering of his banking arm Philippine Business Bank. As a result, the offer price was indeed set at a lower price-to-book (P/B) valuation relative to listed banking peers. PBB’s offer price of P31.50 is about 1.35 times the forward-looking P/B of PBB for 2013, according to sources privy to the offering.
Based on the valuation of the P3.2-billion all-domestic IPO, local brokers say that demand for the IPO is good, specially as many investors are awash in cash and looking for investment outlets amid a low-interest rate environment.
Based on the industry average, banks traded at 1.6 to 1.8 times P/B (BPI was the outsider with 3.4x) last year, making PBB’s valuation attractive, said Joseph Roxas of Eagle Equities Inc.
DA Market Securities, in a research report, agreed that the valuation was attractive “considering improved market conditions and optimistic outlook on the industry’s growth momentum.” Furthermore, “the company has an expansion story comparable to EastWest Bank when it listed, however, PBB, as a savings bank, is at a smaller scale,” it said. (DA Market’s estimated post-IPO price-to-book value of PBB is 1.46x.)
PBB, the IPO curtain-raiser at the Philippine Stock Exchange this year, is set to begin today its public offering, which will run until Feb. 19. Inaugural trading of shares is set on Feb. 19. Doris C. Dumlao
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