Biz Buzz: Philweb’s moment of truth

All eyes of the investing public this week will be on publicly listed online gaming firm Philweb Corp. and it has everything to do with President Duterte’s branding of the firm’s controlling shareholder, businessman Roberto Ongpin, as an “oligarch” that he wants to “destroy.”

That’s because Philweb’s license to operate almost 300 outlets of its “e-Games” network will expire on Wednesday, Aug. 10.

Recall that Duterte had, during his very first Cabinet meeting, issued a directive for the clampdown on online gaming. The brunt of this order fell on Philweb, with stock market investors punishing it with a heavy selldown. From a price of P24 a share when Duterte assumed the presidency, the stock is now trading at P9 each—losing nearly two-thirds of its value over the last few weeks.

Biz Buzz sources in the gaming industry explained that Ongpin knew there would be “zero chance” of Philweb’s license being renewed if he had stayed on as the firm’s chair. As such, he immediately tendered his resignation the day after the President’s ‘oligarch’ outburst.

And because Philweb is a “one-trick pony” that relies solely on the online gaming industry, failure to renew its gaming license with Pagcor will mean the end of the company, along with about 5,000 jobs of those employed by the firm and its franchisees.

Will Ongpin’s resignation be enough to save the firm? Is there wiggle room for the company to renegotiate its contract with Pagcor and perhaps improve the terms of its revenue-sharing deal with the government? We will know in two days.  Daxim L. Lucas

High tech exchange, manual error

WHAT would you do if you learned that you paid more than what you should have for short-term loans you made from banks in recent months?

Or what if you were told that the money you earned for lending out your idle cash to banks or other borrowers for anywhere from three months to a year was more than what you should have actually earned?

Will people be obliged to return the excess money? Who will pay for it?

These are the questions the local banking system is struggling with today after it was revealed that the Philippine Dealing System Holdings Corp.— the operator of the country’s bond exchange and the party responsible for setting benchmark rates on debt securities—made errors in computing at least nine interest rates used by the financial market to price loans.

According to Biz Buzz sources, the errors happened from June 3, 2016, all the way to July 18 this year for some debt securities that had three- and six-month as well as one-year tenors.

That means that interest rates for loans or placements that were based on these so-called “benchmarks” (which is the responsibility of PDS Group’s subsidiary, Philippine Dealing and Exchange Corp. or PDEx) were probably erroneously priced as well.

And the variance between the prices that were erroneously published by PDEx and the price that should have been published was anywhere between 0.48 percent and almost 0.9 percentage point. So one affected benchmark, the one-year security, was priced at 3.2044 percent when it should have been priced at only 2.7016 percent—a variance of 0.5028 percentage point.

Now those numbers may look like peanuts for the average person, but when one considers the fact that billions of pesos of transactions may have been priced based on these numbers during the six weeks that the errors lay undiscovered, we’re talking about some serious money.

In fairness to PDEx, it immediately confessed its sins to the banks that use (and pay hefty fees for) its services, according to our sources. One banker who saw the confession letter said PDEx stressed that the mistakes was not due to any erroneous computing formula, but was, instead, a manual error.

The “lapse” was due simply to the failure of someone in PDEx to monitor and update their system to account for the central bank’s implementation of the so-called Interest Rate Corridor last June, when a key short-term benchmark rate should have been adjusted downward from 4 percent to 3 percent.

Another banker who saw PDEx’s confession letter noted that the officials of the bond exchange “humbly apologized” for the error in its system and promised to take remedial measures. The organization has also confessed to the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission.

The question now is what will regulators do about the error? Are there penalties to be imposed? And what will happen to all the financial deals that where based on the wrong interest rates benchmarks? Abangan! Daxim L. Lucas

‘Common good’

THE SM group has confirmed it was amenable to the compromise that was shaping up for the Metro Railway Transit (MRT) 3, MRT-7 and Light Railway Transit (LRT) common station between SM North Edsa and Ayala Land’s Trinoma shopping malls.

“We are for the benefit of the common rider—what is good for the common rider, without sacrificing what we have done already,” SM Investments Corp. chief finance officer Jose Sio. “If they say [let’s have a] common station, common to all, for the good of the riding public, we all know what’s good for the common public.”

As cited in this space earlier, what’s emerging as the middle ground for the rival property firms is to have the common station at the tip of the triangle between Edsa and North Avenue, on a vacant one-hectare lot owned by the Ayala group but is also only 600 meters away from the main building of SM North Edsa.

The common station was to originally be located initially near the SM City Annex via a 2009 agreement with the Light Rail Transit Authority under the previous administration but in 2014, the transportation department decided to move the location hundreds of meters away to an area closer to Trinoma shopping mall, resulting in a legal battle.

Since the common station will link up all three rail lines —MRT7, MRT3 and LRT1— Sio said everyone could agree to what’s good for the public. He said this would be just like in Hong Kong where common train stations are linked to various shopping malls.

Over the years, SM Prime has spruced up SM North Edsa—with a sky garden and with a new wing for more upscale brands—to step up the game as an Ayala mall was put up nearby. Doris Dumlao-Abadilla

DICT head gets help

SPOTTY internet quality remains a pressing concern, more so in undeserved and remote locales away from urban areas.

To help address that, the Department of Information and Communications Technology is tapping what its secretary, Rodolfo Salalima, dubbed the agency’s “action man.”

This was none other than Retired Gen. Eliseo Rio Jr., who had served as commissioner of the National Telecommunications Commission in the early 2000s. Under the DICT, Rio will serve as prospective undersecretary for special services. The term prospective was used, presumably because this hasn’t been finalized yet.

Rio earned his action man title for his role in the speedy implementation of the 911 emergency hotline.

Speaking of things to happen in a month, Rio said one of his current projects was to launch free Wi-Fi internet across 1,400 municipalities. Yes, you heard that right. Free internet, with a cap, of course, around the municipal building, nearby plaza or park in about 30 days.

Rio said that was a continuation of the Department of Science and Technology’s Free Wi-Fi Internet Access in Public Places Project, which apparently failed to meet earlier-set goals.

This was all part of a national broadband plan, which the DITC could finalize this year. The department would also revive a national broadband network, but in a scale smaller than the controversial and eventually scrapped project with China’s ZTE under President Arroyo.

The idea was for the government to build broadband infrastructure, which the telcos will lease, to serve an otherwise neglected market in what Salalima called the “hinterlands” of the Philippines.

A good plan, all around, and one we hope will finally materialize with the correct action-people in place. Miguel R. Camus

‘Best under a billion’

FOOD and plastics input manufacturing firm D&L Industries landed on Forbes Asia’s “Best Under A Billion” list, the only Philippine firm that made it this year to this roster that honors 200 leading public companies in the Asia-Pacific region.

This list is deemed as the cream of the crop among smaller companies or those with annual revenue between $5 million and $1 billion. From a universe of 17,000 companies, the candidates were screened on sales and earnings growth in the past 12 months and over three years, and for the strongest five-year return on equity.

The accolade comes on the heels of the changing of the guard at D&L, an industrial enterprise that has gained a large investor following in recent years. The older generation within the Lao family has now passed on the baton to the next generation.

Alvin Lao, 44, is now the company’s president and chief executive officer, taking over the post previously held by his uncle John Lao, 61, who will remain director. Alvin also joined the board as director.

Dean Lao, one of the company’s founders, stepped down as a director but remains chair emeritus.

D&L has also hired a new chief finance officer/treasurer and chief compliance officer, Amorsolo Rosario, to take over the post to be vacated by Alvin. Rosario has been with the D&L group since 2010, initially as CFO of subsidiary Oleo-Fats Inc. before moving to the parent company as finance and accounting consultant during the reorganization in 2012. Prior to joining D&L, he was senior vice president of finance at Nestlé Philippines.

An effective face of investor relations for D&L, Alvin said he did not mind continuing the role of briefing investors and the media about the company’s financial results every quarter despite his bigger management responsibilities now. Investors liked it when a family member directly interacted with stakeholders on a regular basis, he said.

Alvin, who joined the family business 19 years ago, holds a BS in IT (honors) and Statistics degree from the University of Australia and MBA from the MIT Sloan School of Management. Outside of D&L, he is an independent director at consumer technology firm Xurpas and vice president of the Technology Club of the Philippines.

With a market capitalization of P71.4 billion, D&L is now the 38th most valuable company in the local stock market (excluding multinational firms Sun Life of Canada and Manulife Financial Corp). Doris Dumlao-Abadilla

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