PhilWeb’s fiery situation

PhilWeb Corporation’s (ticker: WEB) share prices almost went up in smoke last week as it was thrown into a fiery situation resembling President Duterte’s media conferences. Vowing to destroy the country’s oligarchs, whom Duterte said included PhilWeb chair Roberto V. Ongpin, the President directed a clampdown on online gaming.

PhilWeb’s contract with the Philippine Amusement and Gaming Corporation (Pagcor) expired last Aug. 10 and a new one could be out of the question.

WEB has 1.52-billion common issued shares, of which 1.44 billion are outstanding and 1.33 billion are listed at the bourse. It has a relatively moderate free float level (shares readily available in the market) of 24.78 percent.

Shares hit a 52-week high in early February at P28.50 apiece.

A day before its Pagcor contract expired, PhilWeb shares hit the lowest at P3.02 apiece. Some P28.3 billion or 87.56 percent of the firm’s end of June market value went up in smoke. Interestingly, WEB stock prices managed to close higher for the day at P3.85 apiece.

WEB then declared a self-imposed trading suspension the following day, Aug. 10, to stem and protect a further erosion of its market value.

Surprisingly, when WEB resumed trading on Aug. 11, its share price opened higher at P4.25, hit the high of P6.37, dropped to the low of P3.55 and closed at P5.75, on a total volume of 16 million shares worth P58.45 million.

WEB’s closing price showed a remarkable recovery of 49.35 percent or P2.53 billion in market value.

Again, when WEB resumed trading for the second day last Friday, Aug. 12, its share price opened 23.49 percent higher to P7.10 and never dropped lower as it proceeded to trade for the day.

WEB share prices proceeded to hit the session high of P9.49 and closed higher as well by 53.04 percent to P8.80. Total trading volume even doubled to 20.58 million shares and total value turnover likewise increased more than three-fold to P178.16 million.

It was the short-selling activities of market speculators that were responsible for WEB’s roller coaster ride. It was also their short-covering activity that caused the fantastic price recovery of WEB shares to P8.80 per share last Friday.

The apparent ease of WEB’s share prices to recover can be a result of the moderately low free float level of WEB shares of 24.78 percent. When the number of shares available in the market is few or controlled, a spike in market price can happen due to the artificial scarcity created by a sudden rise of demand. A big drop in share prices also happens at the sudden artificial drop or disappearance of demand.

Financial status

WEB was listed via a corporate shell-buyout of listed oil company South Seas Oil and Mineral Exploration Co., Inc. In 2000, the latter changed its primary purpose to an internet company. In 2005, it changed its corporate name to PhilWeb Corporation.

Along with the change in corporate name, WEB “changed its primary purpose to a service provider for gaming and relegated its internet business activities as one of its secondary purposes.”

Two years prior or in 2003, WEB was awarded a license from Pagcor to launch e-Games Stations. These are internet cafes exclusively dedicated to casino games, of which patrons can play more than 300 casino games like “baccarat, blackjack, various slot machine games, video poker and sports betting,” among others. WEB is currently operating 286 e-Games outlets nationwide.

From its financial statements for the quarter ending March 31, WEB realized a net income before tax (NIBT) of P252.10 million and a net income after tax (NIAT) of P212.96 million from a net revenue of P418.63 million. Bulk of the income came from the e-Games operation. These results also translate to an earnings per share (EPS) of P0.18.

WEB has current assets of P823.61 million, total assets of P1.656 billion, current liabilities of P690.05 million, and total liabilities of P766.36 million.

Moreover, WEB has retained earnings (RE) of P2.597 billion, stockholders’ equity (SE)-parent of P888.21 million and book value of P0.77.

Bottom line spin

To a business enterprise such as WEB, its market price or source of value largely depend on its income and ability to earn in the future. With its current situation, PhilWeb is in a fiery situation indeed.

(You may reach the Market Rider at [email protected], [email protected] or at www.kapitaltek.com.)