Biz Buzz: SMC returns

It won’t be a big surprise if San Miguel Corp.—the most actively traded company in the stock market over the last three trading days—reclaims its slot in the main-share Philippine Stock Exchange index in the next review in September.

The conglomerate is now defying the market downturn in heavy volume, as the wave of foreign selling earlier caused by an unfavorable debt assessment by Standard & Poor’s had ended, fund managers said.

SMC, which is also addressing the issue of meager public float that resulted in it being booted out of the PSEi, is now trading above the cheaply priced secondary shares offering of P110 a share. Based on its closing price of P116.90 a share on Friday, it had market capitalization of P270.6 billion—lower than where it should be, based on the research units of Credit Suisse, DBP-Daiwa, UBS, ATR-KimEng Securities and SB Equities Inc.

Based on reports ahead of SMC’s equity offering, the most optimistic equity valuation ranges were P391.7-P504.2 billion (DBS-Daiwa) and P362.8-P524.9 billion (UBS). Credit Suisse valued SMC at P368.5-P426 billion while SB Equities and ATR KimEng valued it at P483 billion and P472 billion, respectively.

The investment banking affiliates or parent firms of these houses, of course, handled SMC’s recent secondary offering. Assuming a working Chinese wall between equity research and underwriting, these houses justified a higher-than-market valuation for SMC, using the sum-of-the-parts net asset value methodology in scrutinizing listed and nonlisted assets in the power, energy and oil, packaging, beverage and liquid, telecommunications, mining, property, banking and infrastructure. Unlike S&P, these houses see SMC’s debt burden a non-issue.—Doris C. Dumlao

Rushed by the Palace?

The Parañaque-Las Piñas bird sanctuary on the fringes of Manila Bay was created by the previous administration in a vain effort to win publicity points at the height of its unpopularity, according to our sources.

Little thought was given to the fact that doing so would aggravate the problem of bird strikes at the Ninoy Aquino International Airport, since the egrets that fly to the lagoon would be in the flight path of aircraft taking off and landing on Runway 06-24 (the international runway).

In fact, our sources say the presidential proclamation declaring the lagoon a protected area was supposedly issued by Malacañang a few years ago with two major flaws: It never had the benefit of a scientific study done to validate the findings of its backers, and it was done without any consultation among the various stakeholders—least of all the birds which used to nest elsewhere before the artificial lagoon was created by a partial reclamation project in the late 1990s.—Daxim L. Lucas

LTO chief off the hook

Presidential shooting buddy and kababayan Virginia Torres could be back at the helm of the Land Transportation Office by June 19.

Torres took a leave of absence in April after she was implicated in the intra-corporate dispute at the agency’s computer systems provider Stradcom Corp.

She was asked to go on leave by President Aquino to make way for an impartial investigation on her involvement in the Stradcom tussle.

This was after a justice department report called Torres “incompetent” for her inadequate handling of a violent takeover of Stradcom’s operations by a group of shareholders claiming to be Stradcom’s new board. This takeover led to a seven-hour paralysis of Stradcom’s, and consequently the LTO’s, operations.

So whatever happened to that investigation? Well, a Palace insider told Biz Buzz that since Torres went on leave, no investigation ever took place. The probe on Torres, our source said, was quashed by the President himself.

Whatever his motives are, LTO stakeholders are bound to ask, “Will the President simply let Torres off the hook?”—Paolo Montecillo

Backlash>/strong>

It took the Supreme Court, sitting en banc, to shoot down a Malaysian company’s bid to take over a landmark Philippine hotel in the 1990s. And no thanks to that fiasco, it took years for the Philippines to regain the confidence of investors.

Nowadays, however, a small government ad hoc committee is moving heaven and earth to undo a multibillion-peso project already approved by the Department of Finance and Neda-ICC.

Some investors are worried over the possible backlash if the project funded by Official Development Assistance is thrown out the window.

Case in point is one European firm’s winning bid for a major infrastructure project. According to Biz Buzz sources, the company presented a two-inch thick document with computations disputing claims that its project was overpriced. In contrast, members of a government review panel allegedly devoted three lines in a two-page report to conclude that the project cost was bloated.

Technocrats who spent hundreds of hours evaluating the project have attested to its viability and affordability anchored on the European company’s untarnished reputation. Yet, the ad hoc committee is bent on throwing all caution to the wind by recommending the costly and possibly litigious rescission of the project only after a cursory review.

The plot thickens, however, after rumors began circulating that another contractor with expressed interest in the project is allegedly behind the smear campaign. How P-Noy will eventually decide the case is now the question on everybody’s mind.—Daxim L. Lucas

Who wants PNPI?

Is there something—or someone—else behind the move to suspend Pacific Nickel Philippines Inc.’s (PNPI) mining operations in Nonoc Island in Surigao del Norte?

The firm seems to think so.

The nickel miner is contesting the assertion of Finance Secretary Cesar V. Purisima, who urged the Department of Environment and Natural Resources secretary to suspend PNPI’s operations for allegedly defaulting on its obligations to the government (having paid only $1.25 million of the $263.8 million the company owed the state since 1996).

According to PNPI, however, it has spent more than $60 million to delineate ore reserves to support the new plant for its nickel ores, the conduct of a bankable feasibility study, mine development, engineering and technical studies, security, maintenance and protection of the watershed and the forest.

From 2005 to 2008, PNPI also paid P277.6 million in taxes, royalties and fees to the government.

The sudden suspension was done “arbitrarily, hastily and without due process,” it said, and will mean the dislocation of at least 1,400 workers and the loss of free electricity and water for about 4,000 residents on Nonoc Island.

It seems that somebody very, very influential is interested with PNPI.—Daxim L. Lucas