Like the old saying “March winds and April showers bring forth May flowers,” the market tends to follow a pattern similar to the passing of the season. But this year, the market’s behavior looks different—it’s out of its seasonal pattern.
As soon as it opened for trading this year, the market went into an unprecedented continuous eight-week climb that catapulted the market all the way up to 6,665.06, with a total net gain of 852.34 points.
Despite the profit-taking activities that ensued, the market continued to push on and posted new record highs. But on the ninth week, the market fell, but only suffered a slight loss of 22.79 points, or 0.34 percent.
With money continuing to enter the market on the tenth week, the market again made a huge weekly gain of 191.50 points, up 2.88 percent. This brought the market to 6,833.77, some 1.44 points away from the market’s all-time high close.
Trading call
By then, I said that “in the face of committing a mistake,” I recommended a “trading sell” to all stocks whose prices had soared. Among these would be Trans-Asia Oil and Development Corp. (TA) and Alcorn Gold Resources Corp. (APM).
Like TA, the price of APM has gone too fast and too high. In the last 52 weeks, APM’s stock price has gone up 1,235.71 percent as the general investing public was mesmerized by its prospect of becoming a holding company of Lucio Co—number 736 on Forbes magazine’s list of the richest in the world, and the seventh wealthiest person in the Philippines.
As reported, APM will own and hold the various interests of Co valued between P40 to P60 billion. Among those to be folded into APM are Puregold Price club Inc., Puregold Properties, Go Fay & Co., Montosco Inc., Incorporada SVF Corp. Premier Wine and Spirits, Nation Realty Inc., 118 Holdings Inc., Patagonia Holdings Corp., Fertuna Holdings Corp., Ellimac Prime Holdings, Cosco Prime Holdings, Meritus Prime Distributions, and Pure Petroleum.
Montosco, Meritus, Premier Wine and Spirits are exclusive distributors of imported brands of wines, spirits, beer and beverages from Europe, the United States and other countries.
With the exception of Puregold Properties (developer of residential and vacation houses in Tagaytay) and Fertuna Holdings Corp., all of the companies engaged in realty business are in the process of merging. Ellimac Prime is to serve as the surviving company.
The total amount of assets to be transferred to Cosco is estimated at $1.82 billion, $1.23 billion of which is accounted by the valuation on the 51 percent interest on Puregold Price Inc.
The acquisition will be done through a share swap and subscription to the increase in APM’s capitalization that will also entail a change in par value from the current P0.01 to P1.00. In the process, there will also be a change in corporate name.
As approved, APM will be named Cosco Capital Inc. This is intended to reflect the company’s new role.
Added to the abovementioned changes, APM will spin off its oil and mineral assets to a wholly owned subsidiary.
When all of the said changes are completed, Co is estimated to own 93.0 percent of the capital stock of Cosco. As a result, this will force the company to conduct a follow-on offering (FOO) to comply with the new rule of the exchange to maintain a minimum public float of 10 percent.
The reason why the company is still trading under its old name is because all of the changes are awaiting final approval.
So far, APM’s page at the PSE website hasn’t been updated. Its nine-month interim earnings per share for the period ending September 2012, is P0.0002. At the current market price of P0.157, APM’s estimated earnings ratio will be about 581.48 times.
Bottom line spin
Again, the market last week became appeared to have broken its seasonal pattern. Even while it continued to sustain a weekly loss of 135.89 points, or 2.04 percent, it made an exceptional display of recovery on Thursday and Friday, when the market made a total gain of 99.09 points that effectively stopped the market’s eight-day fall and brought it back at 6,518.71, which is only a “striking distance” to it last record high.
Since we will have only three days of trading this week because of the holiday, the market may further slide lower. This may be recovered immediately as market punters return from vacation.
Observe a blessed Holy Week.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach him at marketrider@inquirer.com.ph , densomera@msn.com or at www.kapitaltek.com)