Interesting observations

MANILA, Philippines—The four public offerings in a short span of one month or so appeared too much for the market to handle. It slowed down the market’s climb toward the 7,400 territory.

The market was on a roll since the start of the year, hitting the 52-week high of 7,413.62. By the third week of September, however, the market fell. The fall stopped only after losing about 468 points, or 6.3 percent, in the following three weeks. It hit its bottom after closing at 6,946.06 in the middle of October. Thereafter, the market resumed its upward run.

The run continued until Dec. 3 (Wednesday). At that time, the market hit the session’s high of 7,372.16 and closed at 7,360.75.

However, the market slipped 60.29 points, or 0.85 percent, on Dec. 4 and further dropped by 69.29 points, or 0.95 percent, on Dec. 5 (Friday).

Individual performances

The public offerings of all four issues were successful. All four issues were also listed as of last week. The last one was last Friday, which involved the shares from the follow on offering of Integrated Micro-Electronics Inc. (IMI).

Xurpas was listed on Dec. 2 on the Small & Medium Enterprises, or SME, board as a local technology company specializing in the creation and development of digital products and services for mobile phone end-users. Xurpas carried a price tag of P3.97 per share during the public offering.

On the first day of listing, the price of Xurpas shares jumped by 49.87 percent to P5.95 per share. It accounted for 98.45 percent of total transactions of the SME board on that day.

After hitting the session’s high of P8.25 per share, Xurpas shares closed at P8.01 per share last Friday, Dec. 5. By then, the share price of Xurpas had risen 101.76 percent from its offer price.

Because of this, Xurpas became number one among the Top 50 stock price gainers of the market last week. Xurpas shares posted a total value turnover of P1.89 billion.

At its last traded price of P8.01per share, Xurpas shares are calculated to be already trading at the extreme price of 72.82 times earnings per share. This is a big surprise. Technology companies which are already considered overpriced, like Google, are reportedly trading at the price-to-earnings multiples of 30 to 33 times only.

Phoenix Semiconductor Philippines Corp., or PSPC, was not as lucky. It received a strong “buy” recommendation from many quarters as its offer price of P3.76 per share was reported to represent an earnings multiple of less than 10 times 2015 projections.

Upon listing last Monday, Dec. 1, the price of PSPC shares had fluctuated on a downward bias.

PSPC shares traded within the price range of 0.36 to 0.61 centavos below its offer price of P3.96 per share under a heavy selling volume from the hands of foreign investors. PSPC shares sunk further to P3.07 per share by the close of trading the following day.

On Wednesday, PSPC’s share prices fell further; they closed at P2.80 by the end of trading. On following day, with less foreign investors’ selling activity, PSPC stock prices recovered to P2.91 —but still some 0.85 centavos, or 22.6 percent, lower than its offering price.

On Friday, however, PSPC’s stock price settled at P2.84 per share with diminish trading volume but still with significant foreign investors’ selling pressure.

It seems that the long queue of people at the bourse’s small investors’ subscription desk during the public offering of PSPC was not a guarantee of success. PSPC’s performance upon listing last week was a classic example.

However, the lack of it should certainly indicate the obvious as in the case of the follow-on offering of IMI.

A week before listing, IMI shares were already trading at P7.80 per share. This rose to P7.88 per share last Monday, or four days before listing.

Three days before listing, IMI’s stock price continued to rise, closing at P8.01. Things changed on Wednesday, or one day before the listing. IMI’s share prices tanked and closed at P7.90, P7.87 on Thursday and P7.46 last Friday.

Bottom-line spin

Offered at P7.50 per share, like IMI, specialty store SSI Group Inc. (SSI) held an initial public offering (IPO) in late October. It was listed on Nov. 7.

The queue at the small investors’ subscription desk was neither long nor heavy during the offering period. But after trading for almost a month now, the price of SSI shares continued to climb. As of last Friday, its share price closed at P8.68, some 15.7 percent higher than its IPO price.

Evidently, behavior manifested by the general investing public or their so-called cocktail talks cannot be a good basis of estimating the future performance of stock prices. And making forecasts on the performance of stock prices is not a good trading and investing strategy, either. They can only excite one’s judgment.

This is what I was about to tell Ryan (a reader) who—apparently excited by cocktail talks about the said issues—is asking for price forecasts for PSPC and Xurpas.

In answer to his question and similar queries (that I have failed to answer individually), I thought I might just reiterate the ultimate objective of this column—that also serves as my personal investing philosophy as an advice. That is, “making money in stock trading does not mean knowing the secrets of forecasting future prices!”

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.