Sucker’s rally

Alcorn Petroleum Resources Corp., Trans-Asia Oil and Energy Development Corp. and Philex Mining Corp. are three of several stocks that went into active market play, cornering a significant amount of retail investors’ money.

These three issues are now also the subject of animated discussions on whether any of them is actually riding on a “sucker’s rally.”

A sucker’s rally is a phrase used to describe the steady but temporary rise in the price of a stock or market. This happens when a stock’s price or market goes up, even though the rise is not supported by the fundamentals that actually affect the price of a similar stock or market. As such, said stock or market will falter and fall in no time.

It may also be explained in the following way: “The rally may continue just long enough for the ‘suckers’ to get on board, after which the market or specific stock falls.”

The case of APM is amazing. A speculative stock by any measure, it has undeniably brought in record-breaking amounts of money that bolstered both total daily and weekly market value turnover in recent times.

It also afforded investment returns not seen for a long time. For this, APM became, and remains to be, a strong trading and investment player in the market.

On June 29, 2012, APM was just doing P0.016 apiece. By December 28, 2012, it was way up at P0.145 a share, registering one of the most spectacular stock plays that yielded an investment return equivalent to what is called an “eight bagger” (rising in market price eight times over its original price of P0.016 a share).

On Jan. 4 this year, APM fell by 3.45 percent at P0.14 a share. Amazingly last Jan. 25, APM retook lost ground, closing at P0.157 a share. This makes APM only 7.10 percent away from its 42-week high of P0.169, and about 1,121.43 percent away from its 52-week low of P0.014.

Said market play happened, and continues to happen, because APM would become the holding company of businessman Lucio Co, the man behind the successful S&R Membership Shopping and the equally successful Puregold Price Club Inc.

Philex Mining Corp. (PX) is a “first line or blue chip” stock known for its strong track record in improving stockholders’ value as a result of its long record of profitability, good management and dividend-paying record.

After being counted out of the play by the market since the voluntary suspension of its Padcal mine in August last year, PX shares have jumped back to life.

On June 29, 2012, PX was trading at P27.85 apiece. By December 28, 2012, the market price of PX fell to P14.98 apiece.

This stemmed from the leak sustained by the tailing pond of PX in Itogon, Mountain Province. As a result, the company is confronted with the indefinite suspension of its operating permit, including the imposition of over a P1 billion in penalty.

This year, its share price climbed back. Last Jan. 11, it closed at P16.72 a share.

Trans-Asia Oil and Energy Corp. (TA) is a company whose revenue portfolio on power generation and supply, in addition to its mining and oil assets, appears to be promising.

TA’s power generation subsidiaries include South Luzon Thermal Energy Corp. (SLTEC), Trans-Asia Power Generation Corp. and CIP II Power Corp.

Its renewable energy subsidiaries are Trans-Asia Renewable Energy Corp. and Maibarara Geothermal Inc.

TA’s revenue portfolio is augmented by being a licensed Retail Electricity Supplier (RES) and a licensed Wholesale Aggregator (WG).

Based on its general plan, TA is set “to double its power capacity to 400 MW in the next few years.”

TA will also pursue a parallel program on its original business oil and gas exploration. At present, the company has minority participating interests in Service Contract (SC) 6, SC 14, SC 51, SC 55 and SC 69, along with an option to acquire additional participating interest in SC 52.

Also, TA continues to expand its portfolio and customer base at the Wholesale Electricity Spot Market (WESM) since 2007.

Just last November 2012, TA raised some P1.6 billion through a rights offering at an offer price equal to the company’s par value. This was to bolster its financial muscle to pursue growth plans.

Long aware of the rights issue, a sizable part of it ended up in the hands of a group of market makers now said to be behind the 40 percent rise in TA’s stock price since the offering.

Accordingly, the rights issue will be used for equity investments “in several power projects” that will include investments in “those power assets being offered for sale by the state-run Power Sector Assets and Liabilities Management Corp. (PSALM).”

The first stage of the company’s expansion plan involves the construction of the following: the P2.8-billion 20-MW Maibarara geothermal power project in Mt. Makiling, which is expected to “go on line by 2013,” and the P12-billion 135-MW coal-fired power facility in Batangas, in partnership with the Ayala Group, which is expected to “become operational by 2014.”

The second stage of TA’s expansion plan involves the “building of a second 135-MW coal-fired unit in Batangas worth P10 billion through SLTEC, the completion of the P13-billion 135-MW coal power plant in northern Mindanao, a second 20-MW unit for the Maibabara geothermal project, in partnership with the Yuchengco Group and the Philippine National Oil Co., costing another P3 billion and the P6.4-billion 54-MW wind power project on Guimaras Island.”

Most observers believe that APM plans to hold a follow-on offering in the first quarter. This will challenge its present pricing. Also, the current predicament of PX is intolerable. It’s a setback to its future. The fruits of TA’s plans, on the other hand, are yet far from being felt.

(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at [email protected], [email protected] or at www.kapitaltek.com.)