Last May, I made a review on Semirara Mining Corp. (SCC). The question posited then in the review was if SCC was still a good buy, considering that its share price had gone up already a long way.
At the time of review, it was trading just about 8.81 percent away from the then recently established high of P244 per share on March 22.
At the time of the review, too, SCC’s share price has grown by no less than 510 times over the last eight years or so, following the originally established market price of P0.40 apiece in 2002.
By that time then as well, SCC’s first-quarter earnings results just came out. Net income amounted to no less than P4.73 per share.
Considering that SCC had just improved its coal operation (its main source of revenue and income), it looked fairly reasonable to assume that it could consistently repeat the said quarterly earnings performance for the year. At that rate, it appeared that SCC’s market price of P222.80 apiece was then trading at about 11.78 times earnings only.
At the industry average of about 14 times earnings, the said earnings multiple comparatively looked attractive enough. Further supported by the P10 per share cash dividend announced on April 7 (for stockholders of record of May 27—ex-date May 24—and payable on June 22), SCC’s price—though far from being a bargain—should still be a good buy.
Ensuing period
Added to the above considerations, SCC share prices had started to move sideways after sliding down since it hit P244 per share. This was taken to mean that it may be near its bottom price.
Being inclined to be a “bottom picker” rather than a “trend follower” in most times, I felt it was time to decide.
But SCC’s price slide did not stop there. It continued to fall deeper until it hit the low of P187 apiece on June 14.
Not long after, the price of SCC recovered. In a month’s time, it was within a striking distance—as seen now—of its all-time high of P244 per share. On July 22, it hit the high of P241.40 per share. Thereafter, its price swung back to the opposite direction to hit the low of P190 per share on August 9.
Reported in the papers last week to be included in the new recomposed Philippine Stock Exchange index (PSEi), SCC’s price started to climb back.
As of last Friday, the price of SCC hovered within 4 percent higher of its supposed adjusted price (after cash dividend payment) of P219 to P216 per share.
Bottom-line spin
Obviously, the market price of SCC had been influenced by both technical and fundamental factors, with its price lows more distinctly technically affected.
Fundamental influences, on the other hand, are responsible in holding back its price to break out from its all-time high. Topping the list of expressed fears, SCC’s total net earnings for the year may no longer grow much further in the second semester.
As described in the papers, its coal mining operation seems to have been “maxed out.” Its power generation revenues will be limited by the scheduled rehab of its second Calaca plant unit.
As reported, completion date is set by the first quarter of next year. But once fully operational, the Calaca plant is expected “to generate 2.1 billion kilowatt hours or gigawatt hours this year and up to 3.1 billion kilowatt hours or gigawatt hours next year.”
The exceptions and expressed fears on the current situation SCC may be true. But I believe that the way to appreciate SCC now is to look forward to its projected income from its expanded power generation output for next year.
Also, once SCC management will have completed the arrangements for an “off-taker cum strategic partner” for the installation and profitable operation of another 600-megawatt power plant in Batangas, you will not see its price down to as low as it is by now.
Therefore, with a strong market following and robust long-term prospects, SCC is still both technically and fundamentally attractive.
New market index
On September 12, the benchmark index will have a new composition. This is in line with the policy of the bourse to capture as close as possible the real pulse of the market.
To qualify for the benchmark index listing, the company must first have a “free float level of at least 12 percent.”
Second, the trading liquidity of the listed issue must be “among the top 25 percent by median daily value per month for at least nine months out of 12 months. This answers and explains why Lepanto Consolidated Mining Co. (LC) is among those being taken out in the meantime.
While LC had captured a large volume and value turnover, it just did recently. SCC, which is coming into the index, it has been a consistent market maker.
In particular, the period covered by the new index review was made between the trading activities of July 2010 and June 2011.
Third, and most significant, inclusion in the “top 30 [will be] based on full market capitalization.” This should be easy to understand. It should not need further explanation.
Since we still need a grasp on the sentiments on the different sectors that compose the overall market, the index per sector will be maintained. “To be included in the sector indices, companies must rank among the top 50 percent in terms of median daily trade per month in eight out of the 12-month period in review.”
Lastly, the new free float levels of listed companies were taken from their submitted reports to the bourse as of the end of June 30, 2011.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at marketrider@inquirer.com.ph or directly at www.kapitaltek.com.)