Landbank board OKs plan to buy majority stake in PDS

The board of state-run lender Land Bank of the Philippines on Tuesday green-lighted the plan to acquire a majority stake in Philippine Dealing System Holdings Corp. (PDS).

“The Landbank board just approved in principle to acquire at least 66.67 percent common shares of PDS subject to compliance with all legal regulatory requirements,” Landbank president and chief executive Alex V. Buenaventura said in a text message to reporters.

Buenaventura said they would still finalize the timetable and offer price for the planned transaction.

The Landbank chief’s plan to acquire a majority stake in PDS runs counter to the planned merger of the latter with the Philippine Stock Exchange.

“Around September of 2016, I told PSE to be compliant with the law with regards to the allocation of their share to groups of shareholders as a condition to the Securities and Exchange Commission’s approval of their plan to acquire PDS. As of now, 16 months later, they are not compliant,” Dominguez said Friday.

In a Jan. 16 letter to the state-run lender’s board of directors, Buenaventura said he was recommending the acquisition of at least 66.67 percent of PDS.

“On June 15, 2017, the Bankers Association of the Philippines signed a share purchase agreement allowing the Philippine Stock Exchange (PSE) to purchase 1,488,902 common shares equivalent to 23.8 percent of the total outstanding stock of PDS for P476,448,640 or at P320 per share. This implies a valuation of P2 billion for PDS and a PE ratio of 8.10x based on 2016 PDS earnings. Research on the financials of comparable market infrastructure enterprises in the region and globally shows that such businesses trade at an average LTM PE ratio of 34.1x and 35.8x, respectively. This indicates that at a price of P320 per share, PDS is undervalued and purchasing PDS shares could be a profitable investment for Landbank,” Buenaventura explained.

He added that Landbank would benefit from stable recurring cash flow from the various fees PDS charges to market players as the country’s central securities depository and fixed-income exchange.