MANILA, Philippines--I always wanted to reply toall e-mails relating to my column. But I just can?t do that lately. The volume of my e-mails have grown beyond I could individually handle especially when the trading and speculation on small cap companies started to kick off dust recently. So, I thought it might be a good idea to just address them through my article today. They are mostly queries on updates on small caps anyway.
As was disclosed about a month and half back, Straitway Pte. Ltd., a subsidiary of the Japan Gaming Development Organization or JGDO, was interested in picking up a stake in DFNN?s 60-percent owned Singapore-based subsidiary Pacific Gaming Investments Pty. Ltd. (PGI). The transaction will involve a deal that will fix the value of DFNN at the equivalent price of P25 a share.
This share price will, in turn, be used in a related buy-in deal by Cowson Holdings Ltd. and Kirschner Games International Inc. (KGI) with DFNN as they launch a new gaming operation in the Philippines for the state-owned Philippine Amusement and Gaming Corp.
Cowson is the Macao registered consulting and technology and engineering firm experienced in gaming solutions. KGI is the local company that supplies technologies and systems for use in the gaming operation of Pagcor.
Cowson and KGI had requested to conduct a 45-day due-diligence review on DFNN in this connection, the result of which will largely determine Cowson/KGI?s decision to pick up DFNN at the stated market price of P25 a share.
As reported recently, the deal of PGI with Straitway was successfully closed. But just before the DFNN-Cowson/KGI deal was to close last week, the plan to list PGI at the Singapore Stock Exchange through the ?backdoor? process suffered a snag. Their arrangement with listed company Fasttech Synergy Ltd. was disapproved. This makes the derived market price of DFNN in the Straitway-PGI transaction rather stale.
As this happened, the 45-day due-diligence review on DFNN by Cowson/KGI silently ended too without any definitive word quite similar to what happened to the closing prices of DFNN, as some market players claim. DFNN?s closing prices last week did not seem to categorically confirm that the stock play in DFNN was already over.
This is probably because, according to somebody who I could possibly believe is always there whenever music is played in the board room of DFNN, Cowson/KGI is extending their due-diligence review. In the meantime, PGI and Fasttech are said to be up with a new proposal that might just work with the Singapore Stock Exchange. Added to these, from ?the guy? who said before that Cowson et al. have already set up offices because they are here to stay, he is maintaining the same storyline. He even assures me that he can bring any of my e-mailers to the Cowson offices as long as they come out of their mysteriously clad e-mail IDs.
On LOTO, PGPI and WEB
DFNN got a temporary restraining order (TRO) to restrain the Philippine Charity Sewepstakes Office (PCSO) from its latest plan to ?implement betting through PCD/wireless technology with possible vendors? such as Philippine Gaming Management Corp. (subsidiary of listed company Prime Gaming Philippines Inc. or PGPI), Pacific Online Systems Corp. (LOTO), and ?other possible entities? like Philweb Corp. or WEB as reported recently, too. To some observers, the game plan of DFNN is to force PGMC and LOTO to use its technology and facilities at the same time frustrate WEB?s bid with PCSO as announced.
If you don?t know yet, the reason why DFNN sought the issuance of the TRO is because DFNN is pursuing arbitration proceedings in connection with the cancellation of its Equipment Lease Agreement with the PCSO dated April 9, 2003, (?ELA?). ?Under the ELA, DFNN was to provide the PCSO with PCD/wireless technology to enable PCSO to receive lotto bets nationwide via said technology.?
On BEL and APC
Colleagues say that sometimes it is better to observe from the outside than ask from the inside like in the case of BEL and APC.
The purchase of BEL shares in the open market by the SM group, which it needed to acquire a majority stake in the company for the tax-free execution of a stock-swap transaction that will pave the way for the infusion into BEL of a P46-billion entertainment complex in Pagcor City, has been completed about two weeks ago. Yet, BEL continues to be a topnotcher in the stock leader board up to last week out of the huge cross transactions made by a foreign broker. It?s something out of the ordinary that should tell us that we may see a price run-up in BEL before we know it.
The same is true in APC. Two local stockbrokers were identifiably responsible in propelling the price of APC to go up last Friday by as much as 19.15 percent. These two, according to insiders, are carpetbaggers that won?t be playing without any assured pecuniary return.
For one, if you look at the submitted financials of APC as of June 30, 2009, it has subscription receivables amounting to about P3.76 billion. The geothermal project through its subsidiary Aragorn Power and Energy Corp. may require APC to need funds despite a supposed carried-free arrangement with the foreign strategic partner. Also, it is said that the biggest holder of the subscription payables is a competitor in the gaming business. This could possibly explain the play of the two marketmakers.
Bottom line spin
Bored with the situation that things-will-be-getting-better-soon-but-not-any-sooner yet, it seems that the market is turning to speculative plays and/or small cap stock trading. They can yield good returns if handled properly. But the uncertainties carried by the current national elections may simply spoil the whole fun. Therefore, while the current play for small caps is enticing, it?s probably better not to be taken too way out for the moment.
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