Biz Buzz: Probing Calata

The Securities and Exchange Commission recently received a juicy report from the recently created guardian of market integrity in the Philippine Stock Exchange that presented a “clear case” of manipulation of stock prices of newly listed Calata Corp.

Industry sources who have seen the report told Biz Buzz that Capital Markets Integrity Corp. (CMIC)—an independent unit of the PSE tasked to curb stock price manipulation and insider trading—had identified several persons who committed unscrupulous trading of Calata shares. The CMIC’s investigation, our sources said, was triggered by P4 billion worth of trades of Calata shares during a two-week period after listing that, in turn, brought share prices to dizzying heights.

But while the report managed to identify the persons who committed the unscrupulous trades of Calata, our sources said they were believed to be only “dummies” as they were the kinds of folk (some of them live in Bulacan) who were not sophisticated or moneyed enough to pursue such trades. The investigation continues to trace those who had given the financial muscle to such trades. It is believed that it was not the first time for this group to have committed such trades.

The CMIC report is now with the prosecution department of the SEC. With its self-regulatory organization status, the CMIC has the power to sanction erring member-brokers with suspension, monetary fines or revocation of license, but the findings that will be endorsed for court prosecution must be referred to the SEC.—Doris C. Dumlao

The largest airline

Expect the battle for supremacy to heat up between legacy carrier Philippine Airlines and budget airline Cebu Pacific to heat up in the coming weeks and months as the new management at Asia’s first airline goes “all in” in turning the airline’s fortunes around.

While Cebu Pacific has taken to calling itself the country’s largest airline (based on number of passengers carried), PAL continues to dominate the industry in terms of total revenues.

At the end of last year, PAL sold P74.1 billion worth of airline tickets to paying passengers, compared to Cebu Pacific’s revenues of P33.9 billion. That’s 118 percent more, excluding the P7.6 billion in revenues of PAL’s budget carrier subsidiary, Air Philippines.

Cebu Pacific makes up for its lower revenues, however, in the bottom-line department where its net income outstrips PAL’s—mainly because the Gokongwei-owned airline is operating on a low-cost carrier business model, unburdened by all the “legacy” costs associated with a traditional airline.

So where’s the battle going to be? Aside from trying to win a greater piece of the airline industry’s pie (which it did recently, after the entry of the San Miguel group was announced), expect PAL to concentrate on making its operations more efficient.

Apart from realigning the way its short- and long-haul aircraft are deployed, expect PAL to shift toward acquiring more planes via financing schemes versus the traditional way of leasing them (which is a significantly more expensive way of operating aircraft).

So, PAL is already clearly the biggest airline when it comes to revenues, but our source says the uber-competitive new management is serious about making it the undisputed industry leader—revenues, earnings, number of passengers, air miles flown and number of aircraft operated.

Competition can only be good for the flying public.—Daxim L. Lucas

Mining EO risk to cement firms

Malacañang’s newly issued mining executive order is closely watched not just by mining firms, investors, environmentalists, local government units and indigenous peoples but also by cement manufacturing firms, which are worried over a provision requiring the bidding out of mineral production sharing agreements (MPSAs) after the 25-year term expires. Under the Mining Act, the MPSAs are automatically renewed—thus giving them an effective 50-year mining right—and once the extension lapses, the original proponent has the right of first refusal to it.

Leading cement-maker Holcim Philippines, for one, is worried because most of its quarrying sites (to get the limestone used as inputs for cement manufacturing) are expiring and that its long-term investment framework had been based on what was actually provided for by the Philippine Mining Act.

“We support the government’s effort to push for better compliance and Holcim Philippines, for its part, has always remained committed to responsible operations in all its quarry sites,” said Holcim chief operating officer Roland Van Wijnen.

Holcim hopes that the implementing rules and guidelines of the mining EO would not be in conflict with the MPSA provision in the mining law itself. “But we trust that our policy makers will recognize the vital role of the cement industry in supporting the country’s infrastructure program, and that it can only do so if it has sustainable access to raw materials,” Van Wijnen said.—Doris C. Dumlao

Shortage? What shortage?

Who is this politician-businessman who made pronouncements last week that a commodity used for household cooking was in short supply? He accused other companies of holding back supply, thus creating an artificial shortage.

Well… he apparently forgot to mention that other companies were well supplied and continued to deliver this commodity. In effect, it was only his group that was having a shortage.

Sources said the bulk supplier of this politician-businessman experienced a few days’ delay in incoming shipments due to inclement weather. There were also reports that some of the businesses allied with this politician-businessman’s interests were actually withdrawing above and beyond their normal supply requirements, thus worsening the so-called shortage of this cooking commodity.

While the delay was temporary, the politician-businessman’s pronouncements caused the consuming public to panic. When that happens, consumers tend to buy more than what they really need, which compounds the problem even further.

While this politician-businessman supposedly represents a marginalized sector, some eyebrows were being raised because of a potential conflict of interest between his political work and his business interests.

How this business group, which earns tens of millions of pesos, can be considered “marginalized” is a real head scratcher. But that’s another story best left for another day.—Daxim L. Lucas

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